Financial secretary to the Treasury, Jesse Norman, has said that changes should be made to the way self-employed workers are taxed.
At present, self-employed workers pay tax on their profits, i.e. earnings minus any allowable expenses. This differs to employed workers who are taxed on their gross income.
Speaking to MPs on the Treasury Select Committee, the financial secretary was asked whether it is fair that those who are self-employed or trading as limited companies may pay less tax than those who are employed. The Treasury minister responded by saying that if workers are doing the same type of work, regardless of their employment status, then they should be taxed in the same or a similar way.
As a result, the Treasury is advising that self-employed workers should be brought in line with employed workers so that they are taxed at the same rate.
Rishi Sunak also appears to agree. Upon extending the Self-Employment Income Support Scheme until the end of March, he reiterated that if we all want to benefit equally from government support, we must all pay in equally too and, as it stands, there are inconsistencies with how self-employed workers are taxed.
This latest announcement has fuelled speculation that changes could be announced as soon as the March budget. However, the government has also downplayed the need for immediate tax rises due to the financial impact of the pandemic.
When questioned on whether these changes would be implemented in the March Budget, Jesse Norman said nothing was confirmed and that there had also been the suggestion of a ‘tax day’ at some point, when further tax consultations could be announced after the budget.
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