The Government has announced its Tax Day policy changes, and it appears the self-employed could be hit with increased tax contributions despite a tough time during the pandemic. Mr Sunak and co are going to review a modern “pay-as-you-go” system that will attempt to see self-employed workers taxes in a similar way to standard employees. The aim of the change is to see the self-employed taxes as they earn like employees who are paid monthly. The Government has said it wants to stop people “bending and breaking the rules” and earn extra contributions from those who had previously fallen through the £31billion “tax gap”, as reported by the Telegraph.
This is the amount HMRC claims it misses out on each tax year.
Around 30 million employees pay weekly or monthly taxes through PAYE, while freelancers typically pay tax in bigger instalments two or three times a year.
The Government has said for some this can be harder to manage and leads to people more easily falling into debt.
But there are concerns others could be left worse off by the change, which could hit businesses’ cash flow.
Business with a big lag between investing and making money that benefit from paying tax in one go later down the line, such as people buying and selling, in particular would struggle with the regular tax burden.
The self-employed have long been in the Chancellor’s sights, as last March Mr Sunak suggested independent workers could have to accept changes to their tax breaks as a result of receiving state support to help them through the coronavirus outbreak.
He said last March: “I must be honest and point out that in devising this scheme in response to many calls for support, it is now much harder to justify the inconsistent contributions between people of different employment statuses.
“If we all want to benefit equally from state support, we must all pay in equally in future.”
Director of Policy at The Association of Independent Professionals and the Self-Employed (IPSE), Andy Chamberlain, told Express.co.uk earlier this month that his organisation was “disappointed” that many will remain excluded from SEISS.
He said: “We are very pleased to hear that the so-called newly self-employed will finally be allowed into the scheme and make use of the next two grants.
“However, it remains the case that there are well over a million self-employed people who remain without support and have never had adequate support since the start of the pandemic.
“One particular group are limited company directors – they remain excluded from SEISS, so we are disappointed that we didn’t hear what more could be done for them in this Budget.”