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Calm down all you columnists and builders who are preparing to march on Downing Street in protest against the “Selfie” tax hikes from the Chancellor.
Spreadsheet Phil’s little tax wheeze to squeeze more from Britain’s army of 4.75 million self-employed people is not the stinger that many commentators would have you believe.
I’ve just phoned my accountant (self-employed) to find out how much these tax hikes will cost the individuals concerned. And she says that someone earning £20,000 a year will be paying an extra £20 or so a month while those earning £35,000, the increase is £45; that’s a few pints in the pub. Those earning less than £16,250 will have less NI to pay.
Not surprisingly, Hammond is being hammered from both Labour and the Tory right. The Left are dead against the move because many self-employed tend to be the lower paid while Tory right-wingers are claiming that the move is penalising enterprise.
Yet Hammond is right to make these changes. The NI increases will make the tax system fairer as it brings the rates paid by the self-employed in line with those who are employed. It’s also fairer now because they qualify for the same state pension as employed people whereas previously they did not receive earnings-related top-ups to the state pension.
What is not fair is the appalling complexity of the tax system for those who are self-employed and the fact they do not have the same rights in terms of sick-pay and parental leave as their employed peers. So Hammond can’t have his cake and eat it – if he’s going to equalise NI then he must help equalise rights too.
And that’s going to be a growing problem if it is not sorted, and might get the Selfies marching in protest. For the self-employed now make up 15% of the working population, and the number is soaring – from 3.8 million in 2008 to 4.6 million in 2015.
And the numbers will continue to rise as the security of traditional working practices crumbles, and more and more people set up on their own. So too are the black and purple economies that grow alongside self-employment, a factor which the Chancellor didn’t mention but was the elephant in the room.
As well as upsetting journalists, lawyers, accountants and construction workers – up to a fifth of all workers are self-employed – Hammond also hit home at company directors. His decision to slash the tax-free dividend allowance from £5,000 to £2,000 a year from April next year was the real stinger of the Budget, hitting directors and investors whose tax free share portfolio is now down to £60,000 from £150,000.
Again, Hammond right to do so; few will admit it but there are thousands of one-man band businesses who can afford accountants which set themselves up as limited companies to keep taxes down. It’s a well-known clever wheeze so expect the number of limited companies to fall. No one can accuse him of protecting his own tribe.
Hammond’s finest moment was announcing the much-needed package for skills and training. His comment about “parity of esteem” was the Budget highlight and goes to the heart of this country’s problem with technical skills and vocational training.
Indeed, the decision to get rid of the alphabet soup of technical qualifications and replace them with a T-level is brilliant and hopefully soon will be on a par with A levels in terms of respect. Coming alongside the growth in apprenticeships, the £500m-a-year in funding investment,£170m for new Institutes of Technology and loans for technical studies, we could at last start to see some serious realignment between academia and skills. About time too.
There were many other good moves – the £300 million investment to develop the UK’s research talent, including funding to support over 1000 additional PhD places as well as a £100m pot to be invested attract the “best and the brightest” from around the world to ensure the UK keeps its lead in science and research post-Brexit. There’s going to be another investment of £270m next year to drive the development of “disruptive technologies”, including biotechnology, artificial intelligence and robotic systems as well as to get medicines and accelerate patient access to new drugs and treatment.
All good stuff. And Hammond knows he has to keep up these investments if the UK is going to get ahead post-Brexit. As he has previously warned, the UK has to go low-tax, low-regulation if it doesn’t get the deal with the EU he wants.
Which is why Hammond made it crystal clear that corporation tax will be down to 15% by 2020; tax receipts from corporates are up 28% since tax went down in 2011 to 20%.
Otherwise the big news on business rate reliefs – a package of £450m to help pubs and other small businesses – had been well-trailed.
So the verdict on Hammond’s first and final Spring Budget? Boring and sensible, which is just what he and we needed. If there was a surprise, it was Hammond himself; the undertaker has come out of his shell and it suits him. If Theresa May were to be hit by the proverbial bus, it’s Hammond I would put money on to take over.