Chancellor Philip Hammond confirmed the change yesterday, scrapping a planned rise in National Insurance for the self-employed that he had announced in his budget just a week ago.
He was criticised over the fact that the planned tax rise breached his party election promises.
Hammond said: "In light of what has emerged as a clear view among colleagues and a significant section of the public I have decided not to proceed.”
Rebecca Davies, chief executive of LAPADA, said: “Now that the Chancellor has shown how willing he is to listen to reasoned argument, would he please revisit the even more crucial policy of business rates.
"The current plans will prove self-defeating because the damage to business means tax receipts are likely to fall under this change. It is far better to restructure this means of raising revenue in a way that reflects today’s reality, where so much untaxed business is done online while high street shops struggle."
In the March 8 budget, Hammond announced that self-employed or Class 4 National Insurance contributions were to rise from 9% to 10% in April 2018, and to 11% in 2019, to bring it closer to the 12% currently paid by employees.
Hammond has now said a planned review of employment practices would be widened to look at how the differences could be better addressed and has scrapped these planned rises.
Stephen Herring, head of taxation at the Institute of Directors, said: “The business community needs to feel that the government has confidence in its plans for the tax system, and policy isn’t going to chop and change from week to week.”