Sunak warned off tax raid on self-employed

Tom Rees
self employed
self employed

Rishi Sunak has been warned a tax raid on the self-employed would be “difficult to bear” as he draws up plans to plug the black hole in the public finances.

Many contractors “won’t be able to survive if they have to pay more tax” after being shunned in the latest package of support from the Chancellor, the head of the Association of Independent Professionals and the Self-Employed (IPSE) predicted.

Mr Sunak was also urged by experts to look at hitting pensioners and to prepare the tax system for a new normal where Britons could increasingly be remote working outside the UK.

“One in three of the self employed have seen no support whatsoever, and the idea of paying a tax to fill the coffers that have been emptied out into other people’s pockets is a little challenging as a sell,” said Derek Cribb, boss of IPSE.

 He said higher taxation on the self-employed would be “difficult to bear” after the painful pandemic, pointing out that contractors were excluded from extra financial support under tier 3 restrictions.

The Chancellor risks a revolt on the Tory backbenches after signalling he will align the taxes of self-employed workers with normal employees after providing them support during the pandemic. 

The Telegraph revealed earlier this month that several Tory MPs are ready to oppose such a move on workers they regard as entrepreneurial and risk-taking.

Former Chancellor Philip Hammond was forced to retreat from increasing National Insurance contributions on the self-employed after a Tory rebellion in 2017.

However, Professor Judith Freedman, a tax expert at the University of Oxford, backed the plans, arguing that the tax system was a poor way of rewarding risk. She advised against raiding one tax in isolation and said pensioners should also bear some of the burden. 

“If you are looking at broadening the base, people in receipt of pensions should be within your purview because they are not paying national insurance on those pensions,” she said.

“I don’t think it will be popular but I think it probably should be done.”