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Sunak's Self-Employed Shocker

Ten months ago, at the height of the first lockdown, the Government’s daily press briefings features a selection of ministers appearing at the lectern. Many believe that the smoothest operator was Rishi Sunak.  It is true that competition was not strong but he did seem the most assured and most confident that his proposals were the right response at the right time.

Early warning

Of course, it is always easy to appear the good guy when you are helping people by spending money.  But amongst the giveaways was a warning.  Whilst announcing the Self-Employed Income Support Scheme, I did take note of the fact that he said:

‘in devising this scheme – in response to many calls for support – it is now much harder to justify the inconsistent contributions between people of different employment statuses. If we all want to benefit equally from state support, we must all pay in equally in future”

That’s not a controversial statement in itself but it was the timing of this that struck me.  At the height of a pandemic, with thousands in hospital and the economy plummeting?  What a time to signal a major change in the way that the self-employed are taxed!

Sunak is nothing if not a canny politician and Budgets now must be seen more as a piece of political theatre rather than an economic statement.  For all of the speculation about changes in Capital Gains Tax in the Budget on 3 March, I think it is more likely that we will see Sunak announcing a radical change in the way that the self-employed (and those “self-employed” disguised as company directors) will be taxed.

The mark of Sunak?

Sunak wants to leave his mark on the tax system, and the timing is right.  The next General Election is over 3 years away so enough time for any protests from the self-employed to blow themselves out. The politics are right too – there is a need to raise taxes to pay back some of the Covid support and measures which bring rates in line with those paid by employees could be seen as simply ensuring that everyone pays their fair share.  I can imagine Rishi standing at the despatch box and hailing the way that the country has come together to defeat Covid through the vaccine response.  Then moving seamlessly to proclaim that this spirit of togetherness must remain as we pay back the debt.

So what could he do?  Come 3 March watch out for:

  • Alignment of self-employed NICs with employed rates
  • Increases in Income Tax rates on dividends (possibly for companies controlled by a small number of individuals)
  • Application of NICs to dividends (again possibly for companies controlled by a small number of individuals)
  • Increases in rates of Corporation Tax for companies which retain profits rather than spend them (similar to rules abolished in the late 1980s)

I’m not sure this is what is meant by “levelling up”.  Then again….