Why should self-employed accountants pay more tax?

Bill Dodwell, a tax partner from Big Four firm Deloitte, has claimed that self-employed people will lose out if the proposals from the Office of Tax Simplification are implemented.

In particular he highlights the fact that freelancers and self-employed accountants would pay more if National Insurance and Income Tax are merged because they currently pay less NI than employees.

He says the recommendations contain “more questions than answers” and he thinks a lot of the suggestions are not really practical. Making self-employed people pay more NICs is not encouraging the enterprise growth culture that the government is pushing towards.

The self-employed deserve tax breaks because they take more risks setting up a business. Dodwell said it was disappointing that this was not acknowledged in the latest OTS report.

He welcomed the proposal for the tax system for micro businesses, with less than £20,000 turnover, to be simplified but said this would apply to a small minority of people. If the calculations are going to be easier but the tax paid similar, it’s good, but it doesn’t appear that way, he concluded.

Simplification of small business taxation will probably mean less work for tax advisers. The report pointed out that SMEs are paying advisers to help them with the unnecessary complexities of the current system.

John Whiting, the head of the OTS team, wants to see a simple system for micro businesses that is easy for both them and HMRC to implement and one that involves minimal record keeping.

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