How HMRC is wrongly continuing to profit from the self-employed
The headline of this article won’t come as much of a surprise to many FreelanceUK readers, particularly those operating as sole traders. But HMRC is indeed profiteering from the self-employed – and at quite frankly the worst possible time, writes Julia Kermode, founder of IWORK.
Here’s how. The tax office charges individuals who pay their personal tax bill late as much as 7% interest -- all while paying just 3.5% interest to those taxpayers who are owed a tax refund.
Charging twice as much interest as it pays out has been HMRC’s practice since May 31st 2023. That’s not to say that things were much better before this. In fact, they were worse. Previously, interest charged stood at 6.75%, with HMRC paying a meagre 3.25%.
Granted, the Bank of England raised interest rates on June 22nd 2023 for the 13th consecutive month, meaning interest charged by HMRC has increased as a result. But what I can’t fathom is how HMRC is not expected to pay the same amount back to taxpayers when it owes them a refund. It just doesn’t stack up!
Unbelievably unfair imbalance
This unbelievably unfair imbalance applies to income tax, national insurance contributions and capital gains tax, among other levies. What’s more, more than half a million taxpayers this year alone have suffered as a result.
According to HMRC, more than 600,000 people missed the January 31st 2023 self-assessment deadline. These people are grappling with the rising cost of living and a mounting tax burden and many are struggling to make ends meet. Rather than helping these workers, HMRC is taking advantage of them.
A cash influx for HMRC just when it’s self-assessment helpline isn't helping anyone
That’s not to say the extra cash generated by HMRC is necessarily being put to good use at the tax office. Just last month it was announced that the Revenue’s self-assessment taxpayers’ phone line will be closed -- from June 12th right up until September 4th this year.
So along with being expected to pay needlessly high interest on late payments, self-employed workers don’t have access to the government support they need should they require help. As stated in a HMRC press release outlining the closure decision, taxpayers will be directed to the department’s digital services, such as online guidance, digital assistants and web chat.
Westminster isn’t delivering on its rhetoric
All of this speaks volumes about the shocking lack of support that our four million-plus self-employed workers receive from the powers-that-be in Westminster.
The government talks a good deal about how valuable independent workers are, but when push comes to shove it’s these people who are hit hardest by short-sighted and counterproductive policy decisions. Or perhaps -- if we’re to give HMRC the benefit of the doubt, decisions which HM Treasury hasn’t thought through.
A kick in the teeth -- just what the kick-starters don't deserve…
I’ve said it countless times before but it clearly bears repeating: independent workers like freelancers are the lifeblood of the economy -- they kickstarted the economy in the financial crisis of 2008 and are set to do it again. But rather than creating a landscape to help one-person businesses like the self-employed thrive, the government seems hell-bent on making their lives needlessly difficult and financially unfair.