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Class 4 reversal leaves £2bn gap, says KPMG

Philip Hammond’s U-turn on increasing NI contributions will result in a “hole” of £2bn between now and 2022, says professional service company KPMG.

The company believes that the reversal does not change anything with regards to the need for a basic review of how we work. It further asserted that the tax system currently in place still requires reform for it to adhere to today’s work practices.

KPMG tax director Michael Lavan said that the Chancellor, in his letter addressed to Conservative MPs last week, emphasised the credibility given to the Taylor Review and its findings, which will be available in the summer.

He said:

“It is hoped that this review will provide a springboard for proposals in the Autumn Budget, and lead to a more fundamental narrowing of the current fiscal differences between employment and self-employment. Only then will we see a move away from the confusing and ineffective sticking-plaster approach to tax policy when seeking to address the challenges around the taxation of labour.”

Hammond told the House of Commons that the purpose of the intended increase to Class 4 sought to establish a fairer reflection of the entitlement differences in contributions made by those in self-employment. He did, however, acknowledge that numerous questions had been asked with regards to the compatibility of the increase with tax lock plans set out in the 2015 Conservative Party manifesto.

Self-employed individuals have enough to consider when it comes to filing their tax returns without further changes and increases. Fortunately, access to an accountant in the Wirral is never too far away.

Posted by Louise
March 24, 2017
Tax

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