Abolish National Insurance Tax Breaks for UK Self-Employed, Says CentreForum

Tax breaks for Britain's growing army of self-employed should be abolished, according to a new report.

Liberal thinktank CentreForum said National Insurance Contributions (NICs) for the self-employed should be lifted to similar levels as employees, a move that could rake in an extra £2.3bn for the Treasury.

It also calls for NICs of the lowest earning self-employed - a flat tax known as Class 2 - to be scrapped by raising the rate under Class 4, where the highest paid are caught.

"The introduction of the single-tier pension will end the only significant difference in benefit eligibility between the self-employed and employees," said CentreForum's report.

"Aside from a small disparity in Jobseeker's Allowance, there is no compelling reason for the self-employed to pay any less into the system.

"The large tax differential leaves the door open to tax avoidance and benefits the richest most."

CentreForum said that the £2.3bn could be used to reduce the country's burdensome budget deficit.

"However, we model using this revenue to increase the NICs thresholds for all. Even spread across the entire population, this would leave employees £110 per year better off," said the report.

"By scrapping Class 2 and increasing the point at which NICs are payable, the poorer 50% of self-employed workers would also be winners or unaffected, despite the increase in rates."

Since the financial crisis, underemployment in the UK economy has soared by a million.

The economic turmoil has forced many to go it alone in the labour market, becoming self-employed often for the first time in their lives.

There are 4.2 million self-employed people in the UK, with an additional 300,000 if the figure includes those who are self-employed and hold down a main job as an employee of a company.

Since 2010, 40% of new jobs have been from self-employment.