HM Treasury announces further tax consultations – how will you be affected?

Yesterday (23rd March)  the government published a series of consultations which outlined the plans to modernise Britain’s tax system, whilst rectifying flaws that cost £31bn every year.

Here are some of the key announcements:

Freelancers/self-employed to be taxed like employees

The government will review the ‘pay-as-you-go’ system to start taxing self-employed workers in the same way as employees.

The government believes that taxing self-employed workers income on a monthly basis, similar to employees, will limit errors and people breaking the rules. Extra tax revenue will be raised from those who have previously fallen through the ‘tax gap’.

Freelancers typically pay their tax in bigger installments, two or three times a year. This differs from the estimated 30 million employees who pay their taxes on a weekly or monthly basis, through PAYE.

Holiday lets

The government will be policing second home owners with holiday lets more strictly. It was revealed that around 60,000 holiday lets in the UK pay no tax.

Owners of holiday lets are subject to business rates and not council tax, with many small owners benefiting from the 100% relief from the levy. The relief can be applied for if the owners declare an intention to let the property to holiday makers however, owners do not need to prove the holiday let business is genuine.

Under the new rules, introduced by the government, owners of properties that are not genuine businesses will not be able to avoid paying tax by falsely declaring a property is for let.

Green levies for long-distance flyers

The government will hold a consultation on the reform of air passenger duty and on proposals to make those flying the farthest pay more.

Discusses will also be held on whether to cut taxes for shorter domestic flights.

Inheritance tax

Under the current tax system, families who lose a loved one are required to fill out tax paperwork, even if there are no death duties. These forms must then be submitted to HMRC.

Each year around 275,000 tax forms are filled out, even though only an estimated 25,000 tend to pay inheritance tax each year.

Amendments to the rules will remove the requirement to fill out the tax form for non-taxpaying estates. This will save around 200,000 families a year from needlessly filling out inheritance tax forms.

New tax for property developers

In the coming months, the government will hold a discussion on a new tax for property developers. The tax is designed to raise £2bn over the next ten years and will go towards funding the costs to fix dangerous cladding on flats.

Tax dodging schemes

Plans are in place for HMRC to have more power when it comes to the crack down on tax avoidance schemes.

According to official figures, in 2018/19 around £1.7bn was lost to tax avoidance. Around £600m was lost to schemes luring in working taxpayers with a promise of lower income tax, National Insurance and capital gains tax. A further £900m was lost in corporation tax.

HMRC has warned taxpayers to avoid tax dodging schemes and only see tax advice from reputable firms. In some instances many individuals have ended up in trouble with the tax authority, resulting in many being forced to repay everything they owe.

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Emily Dodds

Emily Dodds

Marketing and Business Development Officer

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