The British government abandoned an election pledge not to increase National Insurance contributions in the budget, as the chancellor announced a clampdown on tax breaks for the self-employed.
Philip Hammond scrapped David Cameron's 2015 manifesto commitment as he revealed plans to raise an extra £2bn (€2.3bn) from entrepreneurs by the end of the parliament.
The UK's National Insurance levy on the profits of the self-employed, currently 9pc, will rise to 10pc next year and 11pc in 2019.
Mr Hammond said he had acted to address a multibillion-pound shortfall in National Insurance, which is due to expand as more Britons choose to work for themselves.
A preliminary review had found that lower rates of tax relative to employment were driving the trend, the chancellor added, and under the current regime those in employment face an "unfair" burden.
Mr Hammond also sought to raise more money from self-employed people who work via a personal service company and pay themselves via dividends. The tax-free dividend allowance will be slashed from £5,000 to £2,000 from next year, raising £2.6bn over the parliament.
The move will hit roughly as many ordinary investors as self-employed people, Mr Hammond said, although only those with more than £50,000 in stocks and shares outside Isas will be affected.
"Employed and self-employed alike use our public services in the same way, but they are not paying for them in the same way. The lower National Insurance paid by the self-employed is forecast to cost our public finances over £5bn this year alone. That is not fair to the 85pc of workers who are employees," he said.
Anna Soubry, the Conservative MP, said the scrapping of the 2015 manifesto commitment "could be the first U-turn" and warned it "will not be popular".
Tax breaks for the UK's self-employed will be cut, despite stronger growth this year than expected. The Office of Budget Responsibility (OBR), the British government's fiscal watchdog, revised down its borrowing forecasts over the next five years and said Britain's debt share would also fall faster than it thought just four months ago.
UK growth this year is now forecast at 2pc, up from 1.4pc in November. However, the OBR trimmed its growth forecast for 2018 to 1.6pc, from 1.7pc, and said growth over the following two years would also be weaker than previously thought.
Borrowing this fiscal year is now expected to be £51.7bn. This is £16.4bn lower than the OBR's November forecast and also lower than its pre-Brexit vote projection of £55.5bn.(© Daily Telegraph, London)