The Budget: Lukewarm response to self-employed move: Self-assessment
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Your support makes all the difference.A NEW system of taxation for the self-employed and some employees is to be introduced from 1996. The first tax returns under the system will not be due until the beginning of 1998.
The Chancellor heralded the change as the most fundamental reform of personal tax for 50 years and said the system should simplify accounting for the self-employed.
His announcement received a lukewarm response from the Federation of Small Businesses, where Tony Miller, chairman of the financial affairs committee foresaw problems for the self-employed in estimating their liabilities under the new system of self- assessment.
Far from eliminating the need for accountants, Mr Miller said, the self-employed might need them more than ever, adding to their costs. 'The Government is transferring the responsibilities of the Revenue to the taxpayer. That is the point of this,' he said.
Accountants also thought the self-employed might need considerable help with the new system, especially in the early years.
Richard Collier-Keywood, a tax partner with Coopers & Lybrand, said that ultimately he thought self-employed people would find the system easier and that smaller firms of accountants could suffer in the long term.
The new system will mean that the self-employed are no longer taxed on actual profits made in preceding years. This system has worked to the advantage of the self-employed when profits are rising but could be disastrous when they were falling.
About 4 million people receive their main source of income from self-employment or investments.
The proposed reforms will also apply to individuals who now have tax bills to settle over and above anything they pay through the pay-as-you-earn system. Typically, this will be a higher-rate taxpayer with tax to pay on dividends and interest. At present, they may receive several bills on different income based on past bills. The tax on these bills may fall due on different dates. These people will have the option to work out their own tax bills for the year and to receive one tax statement, with one bill, for all income.
According to the Inland Revenue, about 4 million employees and pensioners could be affected.
The typical pensioner likely to be affected will be someone who has received some interest gross and is liable to pay tax on this.
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