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Self-employed people have been adversely affected by the ongoing COVID-19 crisis, however, the majority have been able to access some level of government support. The continuation of the SEISS scheme is likely to prove good news for those who have been forced to reckon with difficulties relating to the pandemic. However, new tax reforms are incoming for many self-employed people, and it is vital to pay attention.
The government is pushing ahead with its reforms of the IR35 tax, which affects a number of freelance workers and contractors across the country.
These individuals are permitted currently to provide a service through their own limited company to a client, rather than being referred to as an employee by the firm in question.
Under this kind of arrangement, the tax a self-employed person pays can be reduced, and HM Revenue and Customs (HMRC) considers the individual as a ‘deemed employee’.
While IR35 rules have been in place for a number of years, the government is replacing older legislation.
As such, off-payroll working rules are set to come into effect from April 2021 onwards.
The group will then be required to pay, on the whole, the same National Insurance and income tax contributions as an employee.
From next year, employment status of these individuals will be determined by the client concerned.
It will be down to the client to determine if IR35 should apply to the circumstance, and if so, payment to a contractor will be taxed at source.
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IR35 rules are designed to combat the issue of tax avoidance, and ensure everyone is paying their fair share.
Such rules are likely to be very important to many self-employed people, and their implications are wide spread.
IR35 may reduce a worker’s net income, and cost a limited company contractor extra in income tax and National Insurance contributions.
Recently, a petition which urged the government to delay the implementation of IR35 legislation reform until the end of COVID-19 was put forward.
The petition, submitted via the official Parliament UK website, gained 13,981 signatures.
However, the government has recently responded to the matter.
Its formal response read: “The government has already delayed this reform until April 2021 in response to the COVID-19 crisis.
“However, there will not be a further delay. The legislation has now received Royal Assent, and the reform will be implemented in April 2021 as announced.
“The reform was originally announced at Budget 2018. Many businesses were prepared for the reform to be implemented in April 2020 as originally planned, and HMRC have undertaken a significant programme of education and support to ensure that large and medium-sized organisations are ready.
“Since the delay businesses have been putting in place preparations for April 2021, and another postponement would lead to uncertainty for businesses and potentially additional costs.
“Further delaying implementation of these changes would also have other very significant drawbacks. Non-compliance with the off-payroll working rules outside the public sector is expected to cost £1.3 billion per year by 2023/24 if not addressed.
“As well as the fiscal cost, delay would prolong the fundamental unfairness of taxing two people differently for the same work.”
For those who need help when it relates to IR35, it is recommended advice is taken on the matter.
In addition, there are also a number of tax calculators online which may shed more light on the matter.
Today, Leader of the Opposition Sir Keir Starmer and Ian Blackford, Leader of the Scottish National Party in the House of Commmons, commented on the issues faced by some self-employed people.
Speaking in response to the Prime Minister Boris Johnson’s latest announcement on post-lockdown restrictions, both politicians raised the issue of the difficulties faced by self-employed people excluded from receiving government aid.
Mr Johnson responded by stating the circumstances were difficult for many, but that the government had provided billions worth of support.
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