As I See It: Terry Murden
Chancellor Rishi Sunak has won many friends with his series of ‘mini-budgets’ aimed at ensuring we get through the virus crisis, but his pledge to ‘do whatever it takes’ does come with a few exceptions.
Mr Sunak accepts that his plans are not perfect. No rescue package can be. However, despite throwing eye-popping sums at the economy, some sectors of the workforce still feel they have been overlooked.
His latest package to help those working for themselves is for sole traders and partners; it is more difficult for those who have set up as limited companies and are therefore employees of their company. Nor does it include those with profits over £50,000* or who have only recently launched a business.
The latter group will not qualify for the new Self-Employed Income Support Scheme which demands three years of accounts in order to be eligible for a grant.
One point of criticism is that a household with one earning profits of £50,001 will get nothing, whereas in a household with two achieving profits of £49,999 each will get two lots of full support.
Those who work as employees of their own limited company face a particular dilemma as they can only access the scheme if they are furloughed. In other words, do no work, which makes little sense. This also specifically excludes dividend income.
There will be some sympathy for the Chancellor because supporting the self-employed is complicated and, inevitably, some will be forced to rely on benefits for the help they need.
But he could have done more to help those he is targeting. All will have to wait until June before they get any money. That will be too long for some to survive. He could have offered an immediate payment of, say £5,000, to every business, set against the eventual sum and deductible by the tax man if it turns out to be too much, or should not have been allocated.
Even so, he does seem to be a naturally generous Chancellor by nature as well as by force of circumstances and it is more than likely that he will offer further help to fulfil his claim that those running their own businesses have “not been forgotten”.
One interesting and significant consequence of the package is that he may claw back some of the money at a later date by equalising the tax status of the employed and self-employed.
He hinted that tax breaks for the self-employed, such as lower national insurance, may end once the dust settles and he gets back to normal financial planning. These benefits were originally put in place for the self-employed who do not receive sick pay or holiday pay. Tax reliefs have also been a tool to encourage entrepreneurship.
Some may recall that former Chancellor Philip Hammond attempted to end this differential in the 2018 Budget, prompting an outcry that eventually led to him withdrawing the plan.
The current crisis means the rulebook will almost certainly be re-written and looks like a battle that will have to be fought all over again.
• Applies to those with a trading profit of less than £50,000 in 2018-19, or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2017-18