Published: 07:00, 14 March 2017
The Chancellor upped taxes for the self-employed in his Spring Budget to address the culture of people using the tax advantages of self-employment without taking the risk of being an entrepreneur.
Philip Hammond was trying to tackle a growing trend of people shunning staff roles but still having a regular income stream like employees, according to a tax specialist.
Rick Schofield, a partner at accountancy firm Wilkins Kennedy in Ashford, said the lower taxes involved in being self-employed had encouraged many people to take the route.
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However, many are working for a single person or have regular work with a company and are not taking the risks entrepreneurs have to take, which create jobs and economic growth, he said.
This is denying the Treasury tax receipts expected from PAYE staff and not creating the dynamic new businesses required from self-employed entrepreneurs.
The Chancellor faced a barrage of criticism after announcing in the Spring Budget he was increasing national insurance contributions for the self-employed from 9% to 10% next year and up to 11% in 2019.
He has been accused of breaking a 2015 Conservative manifesto promise which said the party would not put up taxes on pay.
Speaking on KMTV business show Chris & Co, Mr Schofield said: “It is still much better from a tax perspective to be self-employed than an employee.
“Unfortunately that has encouraged an awful lot of people to become self-employed when actually they are not taking the risks of being genuinely self-employed.
“They know where their income is coming from and they are not having to go out and get new work all the time, which is what being self-employed is about.”
He added: “When [the Chancellor] first started talking about the self employed I actually thought it was going to be a lot worse.
“It is still much better from a tax perspective to be self-employed than an employee..." - Rick Schofield, Wilkins Kennedy
“The actual increase isn’t that big. For the worst case it is about £500.
“That is not the problem. The principle is they promised not to do it and they have done it.
“I was actually surprised he hasn’t hammered the status of people, rather than the rate. That wouldn’t have broken a promise.”
The decision to up taxes was condemned by the Federation of Small Businesses, which released a list of 37 challenges faced by self-employed people.
Alison Parmar, the organisation’s development manager for Kent, said: “The FSB completely agrees that you have got to pay taxes and play fair and by the rules.
“This isn’t playing fair. They did mention bringing [national insurance payments] in line with employees of the bigger companies but this doesn’t.
“If you are setting up on your own it can be brilliant fun but straight off the bat we found 37 challenges of being a self-employed person. That is where it is not an equal playing field.
“We all need the NHS system and the backup of public infrastructure but if you are truely self-employed and having to find your clients week-in week-out, you don’t have sick pay, you don’t get holiday pay, what about getting a mortgage?
“The level playing field is not there at all and the Government has got to do way more before it is level.”
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