Over recent weeks, between diplomatic engagements and newspaper columns, the Chancellor and PM have both hinted that they intend to lower taxes, with two key areas under consideration:
- Income Tax
The basic rate of Income Tax is currently set at 20% and is levied on earnings between £12,571 and £50,270.
Rishi Sunak had pledged to cut Income Tax to 19% before the end of his government’s term in Parliament – but, according to the Telegraph, there is speculation that could become 18%.
While it may sound like a small cut, in real terms, it would mean someone earning £50,000 a year could pay £1,000 less in Income Tax.
- National Insurance
National Insurance rates were cut in the autumn, for employees as well as the self-employed – although you don’t need us to tell you that limited company contractors and freelancers were largely overlooked in the last Autumn Statement.
Even so, the Chancellor is reportedly interested in a further 2% cut to NI, which could help to put more money directly into the pockets of workers.
So, knowing what we do about the government’s record – and that this year is likely to see an election – we have a rough idea of what to expect from the Spring Budget.
But we’re also conscious of the challenges the self-employed face. And aside from the rumours and reports, we think there are plenty of areas for improvement.
While tax cuts would be welcome, there are wider-ranging – and potentially more impactful – changes to make if this government wants to increase the odds of winning at the next general election.
It’s called a wishlist for a reason, but here are a few things that we’d like to see at the Spring Budget in March.
- Revisit flaws and reverse previous decisions
While reversing the off-payroll rules seems out of the question, the Chancellor may look to solve some of the known flaws of this and the IR35 legislation.
HMRC made surprising progress on this last year by announcing that the so-called ‘double taxation’ of IR35 will be resolved. So it’s not impossible – it just takes political will.
- Targeted tackling of avoidance
Following a Parliamentary debate about the Loan Charge, the scandal has been back in the headlines, and the government is facing pressure to regulate the umbrella industry. The Spring Budget is an obvious opportunity to do so.
- Reverse recent Corporation Tax hike
Limited company contractors have faced a number of tax increases in recent years, with Corporation Tax jumping from 19% to 25%. Reversing this – as well as the reduction of the dividend tax-free allowance – would be a step in the right direction.
- Raise minimum trading allowance
Raising the minimum trading allowance from £1,000 might act as an incentive to encourage more people to try working self-employed, offering more financial rewards for those who do.
- Generous tax cuts for flexible workers
Again, cuts to Income Tax and National Insurance would be welcome, and would provide the self-employed with a buffer against rising costs.
So, will the Chancellor pull a rabbit from his hat in March? Only time will tell.
But one thing’s for sure – the government must prioritise the self-employed in its policy decisions if it wants to win support from the UK’s flexible workers ahead of an election.
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