Are plans to raise NI afoot?

Micro businesses could be the next target of the Chancellor with an increase in national insurance bills for people who leave employment to run small 'lifestyle' businesses.

According to a report in the Times, the Treasury is expected to outline the plan to increase NI contributions in a forthcoming consultation paper.

However, there are concerns that, like IR35 and other measures targeted at small businesses, it will end up being a catch-all that will hit many types of self-employed people.

The NI position of self-employed individuals has for some time been the subject of debate as the taxman counts his perceived losses in this area. Self-employed individuals pay national insurance at eight per cent, compared to 11 per cent for employees and the Treasury also loses national insurance paid by employers for each worker, at a rate of 12.8 per cent.

The Government could attack these lifestyle businesses because they see them as making little contribution to the economy, as they are generally run from home, have no employees and the owner-managers have little desire to expand.

The Times claims that the plans are still being drawn up, but believes that officials aim to penalise these micro-businesses by increasing the national insurance they pay by one or two per cent. The scheme could raise millions of pounds by imposing the rise on those companies that fit criteria denoted by turnover or profit.

However, the scheme already seems flawed as it would be difficult to distinguish between 'lifestyle' businesses and those which are starting out and intending to expand into larger companies.