Mr Sunak recently modified tax legislation for individuals in order to cover NHS and social care costs, but firms and freelancers may be required to contribute more in the future.
Recent developments, such as the rise in National Insurance and the Corporate Tax (will come into effect in 2022/23), will undoubtedly have a significant impact on many firms in the near future. Despite these changes, the UK government is still in need of billions of pounds to cover coronavirus-related expenses.
A number of experts believe the Chancellor will be forced to target Capital Gains Tax in the coming months, which will affect a multitude of businesses, including the self-employed, and even bitcoin investors.
Simon Lancaster, the current founder of SJL Insurance Services, also stated, “My fear is that they will put too much burden on business, many of whom are already struggling from the numerous effects of Covid themselves.” SJL Insurance Services currently pay over £120,000 on pension contributions for their employees, and they are expecting more costs as the National Insurance and Corporate Tax increase comes into effect.
Lancaster is sceptical of the Chancellor's proposals to raise taxes on firms, claiming that it serves as a disincentive to many. As a result, businesses will be less and less motivated to contribute to the economy, taxation, and the current workforce.
These new reforms will have a significant impact not only on all types of enterprises but also on the cryptocurrency industry. Tim Crooks at Gherson Solicitors notes that the UK government is looking desperately at different ways to recover the billions of pounds that were used during the Coronavirus pandemic. As mentioned previously, many believe that the government will focus on increasing Capital Gains Tax next.
Crooks argues that a sudden increase in Capital Gains Tax will have a drastic effect on cryptocurrency investors as they may be taxed at even higher rates.
Even though cryptocurrency is still a relatively new type of asset, investors must pay their taxes depending on how these bitcoin assets have been acquired. Bitcoin investors will also be taxed at varying rates depending on how much money they make from these assets and what kind of assets they own.
The idea of increasing Capital Gains Taxes for self-employed people, in particular, might have a substantial impact on an industry that is weakened by the Coronavirus pandemic.
According to the ONS report, results showed that, unlike the general population, self-employed individuals had a harder time making ends meet after the pandemic. The team stated that "Throughout the pandemic, self-employed workers were consistently more likely to report reduced hours and reduced income than employees.”
Amy Lainchbury, a Social Media Expert at Tasty Comms, faced these challenges as her firm struggled in the face of the pandemic. Lainchbury was extremely critical of the recent tax hikes as her Limited Company lost many clients with little to no support from the UK government, she states, “I had £60k+ worth of client business booked for 2020, and almost overnight it turned to zero, with no sign of being able to replace it.”
According to IPSE’s (The Association of Independent Professionals and the Self-Employed) research, they found that after a spike at the start of the year, freelancers' average quarterly earnings have fallen by more than £2,100, to £18,652.
As the economy continues to recover from the Coronavirus pandemic, it is not certain what taxes will be implemented until the next Budget. We should all expect to gain more information on how Mr Sunak plans to deal with the current financial deficits of the country and whether he will raise more taxes as a solution.
Other than potential tax hikes, we should expect the Chancellor to announce incentives for businesses as well.
Persona Finance offers remote accounting services for all business types. If you own a business, trade crypto assets, or if you are self-employed, and would like more information on how certain taxes may affect you, please contact Persona Finance at [enquiries@personafinance.co.uk], or for other business/ accounting queries.
