Rishi Sunak may raise corporation tax in the budget – self-employed to be hit

Rishi Sunak says ‘all support will be reviewed in budget’

Rishi Sunak and the wider Government have spent billions on keeping the economy afloat during the pandemic, with the ONS recently detailing coronavirus themed spending could reach almost £400billion by March. While the Chancellor has repeatedly detailed he would do “whatever it takes” to support families, he has also admitted this debt would have to be covered eventually and many expect he’ll raise tax rates in the upcoming budget, with inheritance tax, income tax and capital gains tax being identified as prime targets.

However, Rishi is also reportedly considering a corporation tax increase, a cost usually associated with large organisations.

Ed Molyneux, the CEO and co-founder of FreeAgent, commented on this, pushing the Chancellor to focus his efforts on big business as opposed to SMEs: “I can certainly sympathise with UK businesses who will be unhappy about any plans to increase tax on corporations.

“However, I believe the government’s priority should be helping small businesses as that is arguably a more important issue for getting through this pandemic.

“The SME sector is the backbone of our economy, representing around 99 percent of businesses in the UK.

We will use your email address only for sending you newsletters. Please see our Privacy Notice for details of your data protection rights.

“They also represent a fountain of innovation and new solutions, including those in response to Covid-19, which will be key to our future economic recovery.

“However, unlike their larger counterparts, small businesses are commonly dependent on month-to-month success and do not have the same footing larger corporations do to simply stay afloat.

“Therefore, if there has to be a future tax rise, I would prefer to see this introduced for larger, stable companies that are capable of contributing, rather than smaller, more vulnerable businesses.

“I hope the government will think carefully about how best to protect small businesses as we approach the March Budget.”

DON’T MISS:
SEISS grant 4: When will the next self-employed grant be available? [ANALYSIS]
Rishi Sunak confirms HMRC is ‘considering’ SEISS alternative – details [INSIGHT]
Rishi Sunak won’t bring back Eat Out to Out in budget – why? [EXPERT]

While many may assume a corporation tax raise would only impact large companies, Ed went on to warn the changes could harm the self-employed: “Although the self-employed don’t pay corporation tax, many freelancers and contractors opt to run their small businesses as limited companies, which means they do pay it.

“Therefore any rise in the corporation tax rate would actually hit a significant number of these smaller businesses who are already struggling and have been left high and dry in terms of government support through the pandemic.

“The SME sector, representing around 99 percent of UK businesses, needs support at this crucial time of recession in order to invest and create jobs during the months of recovery ahead.

“If the government intends to spend some of the extra tax revenue from the rate hike on small businesses then this could support an important part of the economy that has been largely ignored of late.”

As Ed alluded to, these changes could hurt certain self-employed workers further, as those who have set up their businesses through limited companies are not eligible for SEISS.

Eligibility for support from the Government has been a difficult issue for many self-employed workers, with around three million believed to be ineligible.

Third grants from SEISS can be claimed for up until January 29 but the rules on eligibility are particularly stringent.

A fourth set of grants will become available in the coming months and the Government has confirmed details will be laid out in “due course”.

Rishi Sunak has been pushed to alter SEISS rules in a bid to help excluded workers.

Thus far, the Chancellor has refused to budge, noting the Government’s efforts have already been unprecedentedly generous.

Recently, the Chancellor was pushed on why he hasn’t altered SEISS in Parliament and he had the following response: “With regard to our support for the self employed it’s worth noting, not that you would know it from what the honourable lady said, that almost three million have benefited from support to the tune of around £20billion.

“I do believe that’s comprehensive, it’s indeed certainly more comprehensive and generous support than almost any other country that I can find has provided.

“But of course we will always look at other suggestions we will receive, and I will continue to do that.”

Do you have a money dilemma which you’d like a financial expert’s opinion on? If you would like to ask one of our finance experts a question, please email your query to personal.finance@reachplc.com.

Source: Read Full Article