High Earning Self Employed
The Chancellor has aimed his guns at high earning self employed contractors whom he believes are dodging tax. He believes that they are not paying their proper amount of tax.
A report by the think tank, the Resolution Foundation, says that high earning contractors who earn £100,000 are changing their tax status. That’s so they can save more money in tax.
It reckons that those high earners would pay £7,000 a year less in tax by incorporating.
They no longer have to pay the higher rate in tax as they take much of their money in dividends.
They also save on National Insurance contributions.
Deliberate Tax Avoidance
The Chancellor reckons that this is a scam. He reckons that that this is deliberate tax avoidance.
The number of high earning self employed contractors has doubled in the past 7 years. There are now almost 5 million self employed.
The real growth, though, has been in topline jobs in sectors such as banking, advertising and joining IT as major users of contractors.
It has been driven, according to the thing tank, by their very favourable tax treatment.
Contractor Tax Avoiders
These ‘tax avoiders’, according to the think tank, will cost the Treasury £6 million by the end of this Parliament.
The Office of Budget Responsibility says that tax avoidance by the self-employed will cost the Treasury £12 billion over the next 5 years.
Whether this is true or not, it looks as if they don’t like this very much.
One would bet that they are thinking of doing something about it.
Chanellor Hammond has ‘promised’ a consultation that will look at “how we can ensure that the taxation of different ways of working is fair between different individuals and sustains the tax base”.
It looks as if the Chancellor sees the self employed as tax avoiders rather than budding entrepreneurs who need to be encouraged.
In fact, he sees them as piggy backing on ideas and schemes that various Chancellors created to help those budding entrepreneurs.
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