Chancellor Rishi Sunak will announce his Budget next week, and is said to be considering a number of tax reforms to raise funds. After a turbulent year for the UK economy, many self-employed people are concerned that they may be dealt another blow with tax hikes. Last March, Mr Sunak hinted that independent workers could see their national insurance contributions increased. However, another change that has already been confirmed has sparked anger among many self-employed people.
HMRC confirmed earlier this month that changes to IR35 will come into effect in April despite widespread calls for the policy to be pushed back to a later date.
The changes are designed to ensure private sector employers are responsible for assessing whether or not contractors need to pay income tax and national insurance contributions.
It is also aimed at preventing tax avoidance by “disguised employees” – contractors with permanent positions at companies without paying the same tax or national insurance as standard employees.
However, some self-employed workers fear that the changes will see the private sector take a risk averse strategy and wrongly place contractors under the regulations.
The Treasury anticipates that the policy will raise £3billion by 2024.
But, given that many self-employed people have already been excluded from the Self-Employment Income Support Scheme (SEISS), this has been deemed unfair by some.
Seb Maley of contractor advisers Qdos said company directors unable to claim income support during the pandemic would be hit with “a double-whammy of pain” once IR35 comes into force.
Director of Policy at The Association of Independent Professionals and the Self-Employed (IPSE), Andy Chamberlain, told Express.co.uk earlier this month that the IR35 should be delayed.
Mr Chamberlain said: “In general we are hoping that the gaps in Covid support will be addressed properly in the Budget.
“We are also hoping the Government sees sense and delays the rollout of IR35 in the private sector, it’s a very complicated set of tax rules which will have a big impact on many self-employed people.
“It’s going to be a barrier to them getting work opportunities, so we hope the Government might delay that.”
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Mr Chamberlain warned “this could be the straw that breaks the camel’s back”.
He continued: “People are in an extremely fragile state, and if they have managed to cling on now, the last thing they are going to need is an increased tax burden.
“If we care about our employment rate, if we care about people’s business and if we care about the economy we should not be considering tax rises right now.”
The fourth SEISS grant has been confirmed, and will cover February to April, but details such as its cap remain unclear.
Applications for SEISS 3 closed last month – it covered 80 percent of average monthly trading profits, capped at £7,500 in total.
Between August 17 and October 31, 2020, HMRC received 2.3 million claims for SEISS.
These claims totalled £5.9billion with an average award of £2,500 per claimant.