More than a third of freelancers and contractors will struggle to pay their tax bill, research reveals
A study by the self-employment trade association, IPSE, has found that more than 1 in 3 (37%) freelancers were worried about paying their self-assessment tax returns by the 31st January deadline because of the Coronavirus pandemic.
Around seven per cent of those surveyed said they would not be able to pay at all, while 12 per cent said they would need to borrow money in order to pay this bill. This would be either from friends and family (4%), a loan (3%) or with a credit card or an overdraft (5%).
In the past year, millions of self-employed people have fallen through the cracks in government support, which has put a huge strain on their personal finances and savings.
Nearly half of freelancers don’t know about Time to Pay
According to IPSE’s study, the added pressure of paying this tax will squeeze the personal finances of more than half of freelancers (57%), with a quarter (26%) saying it will have a “strong negative impact.”
In a bid to mitigate the impact Coronavirus has had on freelancers and contractors, the government has introduced the Time to Pay scheme, which allows tax payments to be spread out throughout the year. The government also recently waived the late penalty fee for submitting the tax returns, as long as they are filed by 28th February.
However, according to IPSE’s research, almost half (48%) of freelancers surveyed said they had not heard of either of these measures.
Filing taxes late will still incur interest
Andy Chamberlain, Director of Policy at IPSE, said: “It is clear from these results that this year’s tax bill will be an enormous strain for many of the self-employed – especially since such a large proportion of them have been excluded from support during the pandemic.
“The government has taken positive steps to mitigate this strain, but it is evident that far too many of the self-employed do not know there is help available. In the short-term, we urge the government to do more to publicise schemes.
“We also urge the government to make it clear that being late to pay tax could still incur extra interest payments for freelancers, even if no penalty will be charged for late filing.”