Making Tax Awful scheme postponed
TAX WAS the theme of July's LFB meeting. Our speakers were financial journalist and NUJ trainer Louise Bolotin and Alex Redmond, a partner in Artisan Accounts, accountants to the creative self-employed. Louise noted "stuff in the last budget" including changes to National Insurance (NI) contributions, "a raid on our income". Chancellor Philip Hammond announced that Class 4 NI contributions paid by the self-employed would rise from 9 per cent to 10 per cent from April 2018, with a further rise to 11 per cent the following tax year.
After an outcry over the proposal breaking manifesto commitments it was shelved. Hammond pledged "no increase in NI rates in this Parliament" but June's election means we now have a new one.
Louise updated us on Making Tax Digital (MTD), a plan to get everyone with their own business to file tax returns "quarterly". Louise said Her Majesty's Revenue and Customs (HMRC) were still "going ahead with implementation".
On 13 July, however, the Minister announced that no-one will have to use MTD for income tax before 2020 at the earliest. This confirmed the view that the MTD plan "looks like it's been scribbled on the back of a beermat". They've "only just started putting out to tender" the software that was to have been required so "imagine the number of bugs".
Alex reported that if you're staff on PAYE you pay Class 1 NI contributions. Freelances pay either Class 2, Class 3 or Class 4. Up to now, explained Louise, we've mostly paid Class 2, £2.85 a week. But on your January tax bill there won't be any more Class 2s. These will be abolished as of April 2018. You'll be charged mainly Class 4s. If you make a profit of over £8164 a year, that's 9 per cent of your profits.
Louise also related how some self-employed folk have had their Class 2 National Insurance contributions erroneously overwritten by the software of various different government databases, affecting pension entitlement - see www.londonfreelance.org/1704ni.html