LONDON, March 8 (Reuters) - British finance minister Philip Hammond on Wednesday announced an increase in tax rates for the self-employed, reflecting a growth in the number of such jobs in the last decade.
Hammond said "class 4" national insurance contributions for the self-employed, paid by those with profits of 8,060 pounds or more a year, would increase by 1 percent to 10 percent from April 2018, followed by a further 1 percent increase in April 2019.
He said "class 2" national insurance contributions, for those with profits of 5,965 pounds or more a year, would be abolished from April 2018.
As a result of the changes, all self-employed workers earning less than 16,250 pounds would see a reduction in their total national insurance bill, he told parliament.
According to the Office for National Statistics, about 40 percent of the more than 2 million new jobs generated since the beginning of 2008 have fallen into the self-employed category.
The Resolution Foundation think tank has said the tax system has been slow to catch up to the rapid move towards self-employment in the so-called "gig economy", where individuals work for multiple employers day-to-day without having a fixed contract.
Hammond said that a self-employed person now paid significantly less in national insurance contributions than an employee on the same wage, a difference he said was "no longer justified".
"Such dramatically different treatment of two people earning essentially the same undermines the fairness of the tax system," Hammond said in his budget statement to parliament.
"The lower National Insurance paid by the self-employed is forecast to cost our public finances over 5 billion pounds this year alone."
The finance minister also said he would reduce the tax-free dividend allowance for directors and shareholders of small private companies to 2,000 pounds, from 5,000 pounds, from April 2018. (Reporting by Kylie MacLellan and Alistair Smout; editing by Michael Holden)