The Government is facing a new challenge surrounding tax as a report by Pinsent Masons found a record number of people have rescheduled their payments. Around 850,000 taxpayers are now in Time to Pay arrangements, up 38 percent from a year ago, equating to £100billion in overdue tax which is yet to be covered. This comes as Chancellor Rishi Sunak eyes up potential tax reforms to raise funds after the pandemic.
Speculation that Mr Sunak could opt for a short term rise in national insurance contributions for the self-employed is rife, with one expert warning the Government “will have to raise taxes.”
Mark Collins, Head of Tax at Handelsbanken Wealth Management, is one such expert who said: “Ultimately the government will need to raise taxes at some point.
“The government cannot rely on a prosperous recovery bringing in sufficient revenues alone.”
When asked where he thinks changes will likely happen, he said: “In the short term I suspect certain areas will be targeted such as increasing capital gains tax rates, and possibly equalising the rates of national insurance contributions paid by self-employed persons with that of employed taxpayers.”
While this would only be a short term measure, Mr Collins fears that the long term could see income tax hikes and corporation tax increases.
He continued: “In the longer term it is hard not to envisage income tax and corporation tax increases.
“Nearly every other country will be facing similar pressures and increases may be seen as less of a risk to the UK economy with other competitor economies following similar measures of increasing taxes.
“I would also expect to see the government target certain industries or areas of the economy by penalising behaviour or practices that are seen as damaging to the environment.
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“In order to maintain their pledge not to hike income tax or national insurance, you could create a third way of taking money out of people’s salary.”
Potential national insurance hikes on the self-employed will concern many given how independent workers have been impacted by the pandemic.
Many have gone without Government help, but applications for the fifth Self-employment Income Support Scheme (SEISS 5) remain open – with the deadline on September 30.
To be eligible, you have to have submitted your 2019 to 2020 tax return on or before 2 March 2021, have profits of less than £50,000 and your profits must be at least equal to your non-trading income.