Will PM Rishi Sunak and Chancellor Jeremy Hunt use the Autumn Statement to prove that they can relate to citizens by doing them justice by cracking down on Tory party misspending? Or will they go for uncreative tax grabs aimed at the self-employed and self-investors?
All freelancers and small business owners should be tuned in on Thursday, 17 November’s “Autumn Statement” announcements. That’s the next big fiscal event that The Chancellor and Prime Minister have announced.
There’s already talk in the papers that the Chancellor is considering slashing the tax-free amount on dividends from £2000 to £1000 or taking away the tax-free incentive altogether, which will hit the self-employed and self-investors, the latter when it comes to stocks and property (i.e. landlords).
However, The Treasury will not confirm anything until 17 November’s “Autumn Statement”. In the meantime, The Telegraph reminds us:
Corporation tax is already set to rise from 19pc to 25pc from next April – a further increase looks unfeasible. And the big three revenue generators of income tax, National Insurance and VAT are already off the table if the government wants to keep to its manifesto pledges.
The Telegraph reported that “CGT is expected to raise £15bn in 2022-23, or 1.5pc of all receipts. Currently, rates vary from 10pc to 28pc depending on the type of asset and the income of the taxpayer.”
However, smaller or less profitable businesses will not pay the full 25% rate, and companies with less than £50,000 of profit – the large majority – will not see any increase at all, continuing to pay Corporation Tax at 19%, according to The Treasury.
With talk of more taxes could IR35 be scrapped?
Great Britain’s self-employed, which represent about 4 million people, are unlikely to welcome the news of more taxes or less tax relief as they have to pay for other taxes that salaried employees do not: a combination employee and employer national insurance, the Apprentice Levy and corporation tax. Then there are the additional costs and risks that come with being an independent worker, such as limited liability insurance, accounting services, banking fees, late paying clients and upfront stock costs. If these tax-free incentives are eradicated then should IR35 be eliminated, too?
Cutting back on social benefits in troubling economic times could also prove a step too far.
Misspending: can it get under control before the Autumn Statement?
But before taxes are raised and social benefits are cut, isn’t there a more plausible argument to call for greater accountability on current government misspending when it comes to procurement in the form of government failed projects or misjudged off-payroll workforce status cases that ultimately cost taxpayers hundreds of millions of pounds with nothing to show for it?
The Tory Party may lose face if any wasted taxpayer money emerges while they are in power, as they have in the past, but if they are above all that, then they can boast how much they will save taxpayers or divert less efficient project funds to social benefits.
It will be vital that any new government-funded projects are not just vanity projects and actually benefit or save taxpayers money. For example, a new prison is being built at Full Sutton, which will be the first prison in the UK to run solely on electricity, with solar panels and heat pump technology. The government claims that the renewable power will “use 78% less energy than HMP Wormwood Scrubs – a traditional Victorian prison – cutting energy costs to taxpayers by over £1.1 million a year.”
The new jail will also be supporting former prisoners into meaningful work before it even opens its doors – with at least 50 ex-offenders to be employed by construction firm Kier, said the government report.
However, when there are so many tax-paying households that desperately need better insulation during the energy crisis, and have been let down by government schemes in the past, such as the Green Homes Scheme, they may see that their energy efficiency needs should come first before those serving time.
However, if projects, such as the new prison construction, can create local jobs and keep on budget that is a good thing. But project managers may find it hard to source the talent they need to get projects, such as Full Sutton, off the ground, now that IR35 reform repeal has been reversed.
“If the issues surrounding IR35 are not solved there are serious risks to the future development and competitiveness of the industry, as more and more self-employed workers may leave contracting altogether,” said a Construction Management report.
Brits wants PM to walk in their shoes
The average annual salary of a UK citizen is £33,000 and the average total net worth of UK households is £300,000 ( Bankless Times). However, many taxpayers are not confident that Prime Minister Sunak can really relate to their monthly financial struggles.
Not surprising given it would take 22,121 years for the average Brit to reach the current wealth of Prime Minister Sunak and Infosys heiress wife, Akshata Murty.
It would take 22,121 years for the average Brit to reach the current wealth of Prime Minister Sunak and Infosys heiress wife, Akshata Murty. That’s according to a Bankless Times report, which goes on to say that Rishi Sunak and his wife’s combined net worth is £730 million.
That means Sunak has 2,500 times more money than the average British citizen. This wealth gap is in stark contrast to certain segments of the population. Without a doubt university students. For example, 29% of students have only £50 after paying their rent and bills each month (ONS, Moneyzine).
However, the PM should not be judged by his wealth or the wealth he has married into, but rather by how he, as Prime Minister, will use taxpayer money wisely when people are losing their jobs, losing sleep and losing faith in the Tory Party.
Reading between the political lines
You can read between the lines in Jeremy Hunt’s video below. In typical political PR style, the Chancellor walks the High Streets. But what the video doesn’t show is that there are at least 10 charity shops in that area, which speaks volumes about the state of the economy and high rent rates that small business owners and freelancers cannot afford.
Mr Hunt believes the route to creating a stronger economy will be to beat inflation and that means the government will support Bank of England interest rate policies and very likely higher taxes to fill the hole of debt left by COVID-backed schemes and related procurement.
Higher taxes could also mean that all those limited company directors that were denied equitable COVID funding support (only PAYE), could now become tax grab targets. One could presume based on their actions, that Mr Hunt and Mr Sunak believe that the solo self-employed have larger shoulders than their salaried counterparts to carry the burdens of government pandemic spending.
There is a consensus, they do not. Eddie Young, a professional magician, is like many small business owners and freelancers concerned about higher interest rates and taxes.
Can someone explain to the Government that increasing mortgage payments means we have less money to spend in shops and pubs? This rate rise is just choking the economy and unnecessary as inflation isn’t being caused by excessive spending anyway. Why are small-business owners being punished?Eddie Young, Eddie Young Magic
The Bank of England is heaping misery upon woe. They’ve hiked the base rate to protect Sterling and talked down the pound in the same meeting. You’d struggle to make this up. It’s quite the act.
The next few months will have a profound effect on small businesses, and while I wish the outlook were more optimistic, sadly, we’re about to hit a wall. Let’s hope the Bank of England is wrong about the duration of this recession; thankfully, the one saving grace is they’re usually wrong about most things.Lewis Shaw, Mortgage Broker at Riverside Mortgages