Published On: Thu, Apr 8th, 2021

Self-employed showed smart way to reduce bill for ‘Covid tax break’ | Personal Finance | Finance

Chancellor is reportedly looking to hit self-employed people in the UK with a tax hike. This would be done by axing a National Insurance payment band to bring them in line with payments made by employed staff. Treasury sources have reportedly indicated that Mr Sunak “is minded” to level up the National Insurance system to “create a level playing field”. Currently, self-employed people pay class four National Insurance at nine percent on profits of between £9,501 and £50,000, but employed staff pay 12 percent. Both pay two percent on profit over £50,000.

As fears of a tax hike grow, one expert had advised the self-employed on how to secure a “Covid tax break”.

Mike Warburton – previously a tax director with accountants Grant Thornton – wrote for the Telegraph in March that independent workers could be entitled to a 60 percent tax credit.

This came after Mr Sunak made an announcement that could provide sole traders and partnerships with a cash benefit by reclaiming tax paid in the last three years.

Mr Warburton said self-employed people who have accrued losses can make claims in order to soften the blow from the pandemic.

The measures currently in place allow people to claim losses against any of the last three years.

Mr Warburton added: “It applies for losses made in tax years 2020-21 and 2021-22, the two years most likely to be affected by the Covid pandemic but there is no requirement for this to be the cause of the loss.”

Mr Warburton did warn however, that the loss is carried back against the most recent of the three years first, and he added that you cannot make a partial loss claim.

Mr Warburton also added: “A large enough loss would reduce the previous profits to nil before the surplus losses are carried back further and in doing so your personal allowances of that year could be wasted.

“It means that you will need to calculate which of the alternatives is likely to be most beneficial to you.

READ MORE: Self-employed facing hidden ‘attack’ by Sunak with ‘higher taxes’

Director of Policy at The Association of Independent Professionals and the Self-Employed (IPSE), Andy Chamberlain, told earlier last 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.”

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