The Office for Tax Simplification (OTS) has called for a fairer distribution of taxes to be paid between the employed and self employed once Britain begins to recover from Covid-19.
According to the Financial Times, at a recent committee meeting Bill Dodwell, OTS tax director said there should be a better merge of the tax burden between the self-employed and the employed, however he admitted “it would not be easy” to achieve this.
Currently both independently employed and employed parties pay the same amount of income tax but self-employed workers pay National Insurance Contributions(NCIs) at a lower rate.
Under UK legislation, the rate of Class 4 NICs that the self-employed pay is 9% compared with the 12% paid by employed individuals, the self-employed also do not have to pay employer NCIs which are charged at 13.8%.
In comments obtained by FT Dodewell said: “Many freelancers provide their services via a company and work from the Institute of Fiscal Studies and others have demonstrated that people in that sort of category are able to use the company to smooth out their tax rates and essentially over time they end up with significantly lower rates than everybody else.
“There is the case of evening up the burden of taxation but you’ll have to find different ways of doing it.”
