Tax Policy Director Claims Self Employed Tax Rate ‘Hard To Justify’

Tax specialists have called on the government to look into the discrepancy between the tax rates levied on self-employed and employed workers, arguing that the government’s policies make it more difficult to explain why they are different.

The comments came in a Treasury Select Committee meeting on 15th September, when the Chartered Institute of Taxation tax policy director, John Cullinane, claimed the current situation was eroding public revenues and requiring the existence of several anti-avoidance laws, according to the Financial Times.

The committee began this discussion reflecting on the measures that had been taken early during the Covid-19 pandemic to protect the livelihoods of self-employed people. After public pressure to incorporate self-employed people into the government’s coronavirus job retention fund, Rishi Sunak announced his support, protecting as much as 80 per cent of their earnings.

However, this has led to a serious dilemma as employed people and self-employed people pay different levels of tax, which has a knock-on effect on their ability to charge less for their services than a fully employed member of staff.

This would appear to be a discrepancy, although it assumes that people who are self-employed get the same level of benefits, which is often not the case.

Self-employed people do not get work-based pensions and whilst many employees are taxed on a pay-as-you-earn basis which does not require them to file a self-assessment, self-employed people are required to file for self-assessment either by themselves or using QuickBooks and/or an accountant, whether they are based in Bourne End or elsewhere.

It is a complex conversation that will be as much a political discussion as one about economic fairness, and one that needs to be handled in the right way at a time when many people’s livelihoods have been devastated.