The Association of Independent Professionals and the Self-Employed (IPSE), has responded to the government’s call for evidence on a new tax system for the self-employed. This system would replace annual self-assessment tax returns with a rolling in-year system. IPSE has said that although it welcomes the government’s concern with the tax experience of freelancers, there are still “unanswered questions” about the proposal that must be explored.
“First, many self-employed people’s incomes fluctuate substantially throughout the year – and while the current annual system accounts for these and ensures self-employed people pay the right rate, it is not clear how this would work with rolling in-year taxes. It is also not yet clear how this would work with late payments – which are a substantial problem for the self-employed.
Over the last decade there has been a rapid increase in the UK’s workforce working through their own businesses and becoming self-employed for many different reasons.
However, there are reports that the Treasury lose out on a significant amount of tax when you compare an employee doing the same work as a self-employed person, working on their own or through their own limited company.
What is the argument? The Treasury are losing out on tax as the self-employed are not subject to employer’s National insurance Contributions (NIC’s) as an employee’s income would.
The Chancellor is now trying to rebalance the loss of tax due to the continued increase of UK workforce working as self-employed.
Rolling out this new tax system is the best strategy to do this, as it seems. Whether this will work or not, only time will tell. No doubt that such an overhaul of the system will be extremely costly in itself.
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