During the 2015 Budget announcement, George Osborne revealed two planned changes that were presented as benefitting self-employed taxpayers; abolishing the annual paper tax return and Class 2 National Insurance payments.
No more annual tax return!
The Chancellor described the first change as a “revolutionary simplification of the tax collection scheme” which will apparently assist 12 million Britons. A new online bank account is set to replace the annual tax return submission which is designed with flexible payment in mind. Self-employed taxpayers will be able to receive up-to-date information from HMRC, see how much they owe in tax and pay them “at a time in the year that suits them”. This last point was made emphatically by Osborne using his ‘in bold’ voice.
Whilst most of us probably have an expletive laden name for our annual tax return and welcome its demise, there are two sides to the tax system coin. As you know, there is more to self-assessment than just working out how much tax you owe.
As Simon Wagman, partner at Blick Rothenberg LLP told ITV News, “When you file your annual return, you would consider allowable expenses, deductions and payments. However, this may no longer be as apparent under the proposed new system.”
This so called “simplification” could well result in many taxpayers missing out on their legitimate tax relief entitlements.
Get rid of Class 2 National Insurance payments!
The Chancellor announced the abolition of Class 2 National Insurance payments as another perk for the self-employed tax payer. But once the experts worked out the actual maths, it’s not as exciting as it may first appear.
A tax dispute resolution partner at the accountancy firm BDO, Denise Register, put the amount of saving at £2.75 per week. She explains the reason that this proposition is rather disappointing, “Proposed changes to National Insurance will be subject to a consultation process at the end of 2015 and there was only a commitment to make changes in the next 5 years. It will be a saving of £2.75 a week, so an extra cappuccino on George Osborne is better than nothing.”
Perhaps we have another case of ‘better the devil you know’?
