Hundreds of thousands of private-sector contractors face higher tax and National Insurance (NI) bills from April 2020.

The chancellor announced that tighter tax rules for those working in the public sector will be extended to those working for private firms.

The rules, known as IR35, are designed to hit those deemed by HM Revenue and Customs (HMRC) to be employees.

Among those affected will be IT contractors, engineers, Doctors, Nurses and consultants.

The crackdown is the biggest revenue-raising measure in this year’s Budget.

Critics accused the chancellor of hurting thousands of people who are self-employed, and burdening businesses too.

But the Treasury insisted that the reforms would not affect anyone who was genuinely self-employed.

How will the new rules work?

For IR35 to apply, you have to work through your own company for another business.

If the way you work is similar to an employee of that business, you should pay income tax, and National Insurance (NI) at the 12% rate.

Up to now many contractors in personal service companies have been paying less tax and NI.

But from April 2020, larger businesses – like banks – will take on responsibility for deciding which contractors will need to pay more tax and NI.

The rule change will not apply to the smallest 1.5 million businesses.

If someone is deemed to be an employee, the firm using the contractor will also have to pay NI for the first time.

If classified as an employee for tax purposes, they would have to pay income tax, and NI at 12% on the money paid for their work. However they may not have other employee rights, like maternity leave.

The Treasury estimates that the changes will bring in an extra £2.9bn by 2024.

When similar changes were brought in to the public sector last year, HMRC raised an extra £550m in tax and NI.

The Association of Independent Professionals and the Self-Employed (IPSE) accused the chancellor of putting the self-employed in a “holding pattern of despair.”

“The government’s smash-and-grab mentality will therefore punish the overwhelming majority of genuinely self-employed people, heap a massive administrative burden onto businesses at a time of Brexit uncertainty, and also undermine one of the UK’s most dynamic and productive sectors,” said Chris Bryce, IPSE’s chief executive.