The Government’s dramatic U-turn on proposed National Insurance increases for the self-employed announced in the Spring Budget has been welcomed by accountancy firm, Bishop Fleming.
But the company wants the Chancellor to go further and reverse the planned tax rises on those business owners who run their own companies.
While the planned scrapping of Class 2 National Insurance Contributions (NICs) paid by the self-employed will go ahead, the 2% increase in their Class 4 contributions will be shelved until 2020. The Chancellor has said he will look to see how he can plug this hole with new measures to be announced in the Autumn Budget.
Bishop Fleming’s managing partner, Matthew Lee, said: “While I welcome the fact that unincorporated businesses will not have to pay more NICs, I remain very concerned about the extra tax to be collected from those who run their own companies.”
Lee explained: “The announced £3k reduction in the dividend tax-free allowance from April 2018 is a body blow to entrepreneurs operating through a company. It means that business owners will be worse off by £225, £975 or £1,143, depending on whether they are basic rate, higher rate or additional rate taxpayers.”
Lee pointed out that for a couple sharing the running of a company, the tax impact would be doubled to £450, £1,950 or even £2,286 depending on their tax rate.
He added: “Business owners, whether they are operating through a company or not, should be supported and encouraged by this government, not punished, as they generate many of the jobs and wealth that the UK needs. The means not taxing them unfairly.”