Within the unbiased face it’s important to pay a tax invoice that’s greater than what you’ve earned
One million of the 4.5 million self-employed in the UK have to prepay tax bills higher than what they actually earned this year.
Many freelancers pay self-assessment tax bills twice a year, with the first advance payment due in January.
This despite the Covid pandemic, which has decimated many independent profits since March.
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The problem is that the prepayments are based on the previous year’s profits, in this case what the self-employed earned in 2019-20 – before the pandemic broke out.
TaxScouts, an online self-assessment tax service provider, estimated that 1 million people could be affected by an excessive tax burden, as the invoice payment is based on the previous year’s result.
“While this is all well and good in normal times, it doesn’t take into account the huge loss of income that so many self-employed will face during the pandemic,” TaxScouts said.
In anticipation of the problem, however, HMRC has allowed the self-employed to defer payment on account and request a reduction in their tax burden if they face financial difficulties and know that their income will decrease.
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HMRC has also set up an online portal that allows the self-employed to spread their tax burden of up to £ 30,000 over 10 monthly payments.
“We’re not the monsters people think we are all the time,” said a Financial Times spokesman.
The problem, say HMRC’s critics, is that not many self-employed people know about the flexible prepayment portal or that they can request that prepayments be reduced.
And, of course, many are using the profits made that year to prepay next year’s tax bill. Given that the revised Self-Employed Income Support System (SEISS) only covers 40 percent of previous income, some will wonder how to pay their tax bill – even if it is split into monthly payments.
The self-employed in the UK started the year at 15.3 percent of the workforce, or 5 million people. However, the number of self-employed fell by 400,000 between January and August, according to the Bureau of National Statistics.
Independent “in the lurch”
Meanwhile, the Labor Party has estimated that the average arts or hospitality self-employed person is only getting £ 450 a month through SEISS – half the amount they received monthly during the initial lockdown.
This also applies if their stores are either closed or restricted by Tier 2 or 3 restrictions.
Ed Milliband, the shadow business secretary, warned the government against “abandoning” 500,000 people.
Mr. Milliband said, “Almost half a million self-employed people work in industries that are partially or completely closed. They are in desperately troubled waters and many are very concerned about their future.
“But the ministers take away their life raft and let it sink or float. This is not only persistent, but also economically wrong. These are the artists and performers of our country as well as people in our fields of tourism, sport, culture and hospitality. “
Self-employed Income Support Scheme what it means to you