New Chancellor targets Corporation Tax and National Insurance introduced by Sunak
Kwasi Kwarteng, the newly-appointed Chancellor in Liz Truss’s government, is expected to announce a series of tax cuts in his emergency mini-budget this Friday (23rd September), thought to amount to £30bn.
Factored into the package are the measures to support homes and businesses from rising energy costs, which have already been revealed. Further details for businesses in need of support are expected to follow and are expected to be set out by Jacob Rees-Mogg, the business secretary in the cabinet.
The emergency mini-budget will be the first move by the new Prime Minister to deliver on her campaign promise of a low taxation government in a bid to boost the economy. It will be followed by the full Autumn budget in November this year.
Cuts to create a friendly tax landscape
According to various news reports, the Chancellor may target tax cuts across the spectrum, including reversing the planned increase to Corporation Tax due to take effect in April 2023. Any move to scrap this incoming rise is likely to be welcomed by freelancers and contractors.
Business Rates is another tax which experts have called for action on. And while the Business Rates system might feature in Friday’s announcement, the full Autumn budget may also offer a greater reduction to this tax – which Truss has previously said that she sees as a barrier to growth.
Also mooted is a VAT cut of either 2.5% or 5%, and a 1% reduction in Income Tax.
In addition, the new Prime Minister is said to be considering raising the threshold for the higher rate of Income Tax, from its current level of £50,270, to £80,000.
IR35 review yet to be announced
While the mini-budget may provide some good news for contractors, as yet there has been no further announcement from Truss, her Chancellor, or the wider government, on the promised review of IR35.
Truss’s pledge to review IR35 was well received across the industry, but any excitement is tempered by experience, with previous reviews and the recommendations produced – even by the House of Lords – having fallen on deaf ears.
Speaking shortly after Truss was confirmed as the new Prime Minister, Andy Chamberlain of trade association, IPSE, said the organisation would work with the government to resolve “the many issues facing thousands of freelancers and small businesses, such as IR35, employment status and Managed Service Company legislation”.
Funding to stop proliferation of tax avoidance schemes
The need to clamp down on tax avoidance schemes, which “continue to pose a major threat to contractors, along with recruitment agencies and end-clients”, should be another consideration for this government, says Fred Dures of Payepass.
Calling for both the regulation of the umbrella industry and greater funding provision for the Employment Agencies Standards Inspectorate, Dures said that these measures could “make a big difference” to the industry, offering greater protection to contractors, temporary workers and “the wider supply chain”.