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HIGH EARNERS LEFT OUT IN THE COLD
Adam Stronach, partner at Harwood Hutton, finds little comfort in the Self Employment Income Support Scheme for those entrepreneurs who help underwrite the income tax system.
While the Chancellor’s statement on the self-employed with taxable profits up to £50,000 is welcome, there are gaps in the package announced yesterday. For example, the scheme does not cover people who only became self-employed very recently, and the fall back for support for those people appears to be the benefits system. The announcement was also disappointing to the extent that it did not address those who have, quite legitimately, organised their affairs by taking a small salary from their business, with the remainder as dividend.
These people are a driving force of our economy and need support as much as others, so there is a major disconnect in the Government’s thinking here.
Consider some telling figures: according to the Institute for Fiscal Studies, in 2019-20, the top 10% of income tax payers (those with incomes over about £59,000) paid 61% of income tax, and the IFS claims the top 1% of the adult population now pays well over one third of all income tax.
It could well be that ‘high earners’ and those who legitimately use dividends as a means of taking income from their businesses have more resilience built into their personal finances to weather the Covid-19 storm. But there will be a sizeable proportion of them who have been laid off, or lost business which drives their income, or more generally be facing a significant reduction in earnings.
When the country is back on its feet, it will be these people to whom the Government will, once again, need to turn for income tax revenues.
A reminder of the key points in Self Employment Income Support Scheme announced on March 26 by chancellor Rishi Sunak:
• Self-employed workers can apply for a grant worth 80% of their average monthly profits – up to a maximum of £2,500 a month
• The scheme will only be open to those with profits of up to £50,000 a year
• Mr Sunak said the 5% of the self-employed who are not covered by the scheme
• The cash will be paid in a single lump sum but will not begin to arrive until the start of June at the earliest due to the complexity of the scheme
• The Chancellor has been warned the delay could see millions left unemployed.
Click here for more details on the Self Employment Income Support Scheme
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