Philip Hammond said that “such dramatically different treatment of two people earning essentially the same undermines the fairness of the tax system”.

The main rate of Class 4 NICs for the self-employed will increase by 1% to 10%, with a further 1% increase in April 2019.

The government had already announced that it will abolish Class 2 NICs – an at-rate charge on the self-employed – from April 2018.

Since April 2016, the self-employed also have access to the same State Pension as employees, worth £1,800 a year more to a self- employed individual than under the previous system, officials stated.

The main rate of Class 4 NICs will increase from 9% to 10% in April 2018, and to 11% in April 2019 “to reduce the differential and reflect more equal pension entitlement”, the Treasury said.

Taken together with the abolition of Class 2 NICs, this means that only self-employed individuals with profits above £16,250 will have to pay more NICs, officials stated.

Mr Hammond said: “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 £5 billion this year alone. That is not fair to the 85% of workers who are employees.

“The abolition of Class 2 NICs for self-employed people, announced by my predecessor in 2016 and due to take effect in 2018, would further increase the gap between employment and self-employment.

‘To be able to support our public services in this budget, and to improve the fairness of the tax system, I will act to reduce the gap to better reflect the current differences in state benefits. I have considered the possibility of simply reversing the decision to abolish Class 2 contributions, but the Class 2 NIC is regressive and outdated. It is right that it should go.”

He said: “So, instead, from April 2018, when the Class 2 NIC is abolished, the main rate of Class 4 NICs for the self-employed will increase by 1% to 10%, with a further 1% increase in April 2019.

“The combination of the abolition of Class 2 and the Class 4 increases I have announced today, raises a net £145m a year for our public services by 2021-22, an average of around 60p a week per self-employed person in this country.

“And since Class 2 contributions are payable at a flat rate, while Class 4 is chargeable as a proportion of profits, all self-employed people earning less than £16,250 will still see a reduction in their total NICs bill.”

He said: “This change reduces the unfairness in the NICs system and reflects more accurately the current differences in benefits available from the state.”