Perhaps this is not an auspicious start for the new Chancellor in that he has now abandoned one of the measures he announced only last week in his first Spring Budget.
Simon Littlejohns, Head of Tax at Birmingham accountants and business advisers Friend Partnership, examines the implications of the National Insurance U-turn announced today, 15 March.
No doubt the mounting pressure from his colleagues, and a closer scrutiny of the manifesto pledges made by the Conservatives, has led him to the conclusion that it would be inappropriate for him to proceed with the proposed increases in National Insurance for the self-employed which were timetabled to come into force on 6 April 2018.
Whilst this may be good news for many, one is left wondering where he will now get the £2 billion from which he was expecting to raise with this measure by 2022.
My fear is that he may look to other perceived “inequalities” which exist within the UK tax legislation.
If the difference in the rates of National Insurance paid by employed individuals and a self-employed individual was viewed as an inequality, perhaps he will now turn his eye to the OMB sector. Here dividend planning is an integral part of remuneration strategies for all such businesses.
Notwithstanding the planned reduction in the dividend allowance from £5,000 to £2,000 planned for 6 April 2018, might the Chancellor now look to take further measures to reduce the benefits which can arise with appropriate share and dividend planning for OMBs? My fear is that he will and that we will have to wait until the Autumn Budget to find out more.
This may therefore be an appropriate time for business owners to take a close look at their profit extraction strategies.