The changing landscape of taxation
Last updated 6 April 2020
“It is now much harder to justify the inconsistent contributions between people of different employment status. If we all want to benefit equally from state support, we must all pay in equally in future”.
Whilst the Chancellor addressed the UK’s 5 million self-employed workers, notifying them that they would also benefit from similar support packages as their employed counterparts, he also delivered a view as to what taxation may look like in a post COVID-19 world.
There is no doubt that the UK Government are producing unprecedented support to our business communities and are fighting to save jobs during this crisis. However, what happens when the “tide has gone out”, and the money needs to be recovered?
Rishi Sunak has indicated that there will be a significant revision of the tax system. The most obvious disparity between the various status of different employments, is with National Insurance Contributions (NIC’s). The Conservative party’s backbenchers overturned a relatively small proposed change to NIC’s back in 2017 (a 1% increase for each of the following 2 years), which was forecast to raise £2bn.
This may also lead to other consequences – an example being dividends drawn by shareholders of owner-managed businesses. NIC’s are not currently levied on dividends, but will they be in the future?
The Institute of Fiscal Studies have estimated that the impact of a smaller economy and the direct costs of fiscal measures implemented in response, will increase borrowing by £120bn in 2020-21, more than tripling the amount forecast just weeks ago.
There are certainly some difficult decisions that the Chancellor will face in the upcoming years, as the apparent underfunding of the NHS is amplified now more than ever. This is in addition to the increasing demand from the public that those who can support the effort contribute their fair share.
It’s a commonly heard phrase that the country will not be the same again; this may be true in the tax field as much as anywhere else.
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