It may be two weeks ago, but nobody should be tempted for forget this year’s Budget.
In almost three decades of writing on them I cannot recall a chancellor who has produced policies that are so poisonous to the self-employed and so anti-enterprise.
Philip Hammond likes to be known as Spreadsheet Phil. More appropriate would be Steamroller Phil for his ruthless crushing of ambition and self-reliance.
As a self-employed person, I was, after the Budget, facing four tax rises in four years that threatened to snatch thousands from my income.
Many of you and your clients will be in similar positions.
My woes started this year because I can no longer put a penny into a pension.
I cannot blame Steamroller for this. It is my own fault for starting to save when I was in my early 20s and choosing my investments wisely. Clearly I must be punished.
From April, I there is a shake-up to flat rate VAT, a system introduced a decade ago to cut paperwork for small businesses. As a journalist I might charge £1,000 plus £200 VAT. I pay 12.5 per cent of the £1,200 to HMRC. That is £150. In a swipe at the self-employed announced in his autumn statement Hammond decided goods bought must be 2 per cent of turnover.
He excluded phone and broadband bills, accountancy fees, computer equipment (capital expenditure), and printer ink and paper if you ever have home use (and who does not?) – all vital to many self-employed.
Vehicles are excluded if you are not a road haulage firm, something that could hit many self-employed financial advisers. If you cannot hit the target then the VAT payment rate is 16.5 per cent, which on the example above is £198.
So that is a 4 percentage point rise in my tax bill (others face bigger rises) or I must go back to the laborious method of accounting for every VATable expense.
I have now been spared my third and fourth tax rises as the Class 4 National Insurance rises were scrapped in the face of intense opposition.
Others – including 460,000 pensioners – will lose dividend tax relief on a massive chunk of savings after Mr Hammond cut the limit from £5,000 to £2,000. Perhaps, in his hunt for fairness, he should look at the massive taxpayer subsidies on the copper-bottomed pensions received by MPs and civil servants.
Rather than callously crushing the self-employed perhaps Phil ought to consider measures that might affect his own bank balance.
Pension suspension
The government has expressed surprise that just 7,600 have chosen to pay Class 3a National Insurance to boost their state pension.
The offer, which closes next month, was aimed at those who retired before 6 April last year when the new state pension was launched.
While paying Class 3a can knock an annuity into a cocked hat, it is far from being the best option for pensioners with a few thousand pounds to invest.
Filling state pension contribution gaps via Class 3 is better value for younger pensioners where available.
The niftiest option for many is to suspend taking the state pension for a year or two and live off savings rather than using them to buy Class 3a NICs. Those who retired before April 6, 2016, still get a 10.4 per cent a year uplift in their pension for every year they suspend it. The money can be taken as a larger pension or a taxable lump sum.
Suspending for a year would cost £6203,60 in state pension and provide a £645 annual uplift which rises with CPI. Buying a slightly smaller £624 annual uplift through Class 3a would cost £10,164.
For those who can afford it suspending the state pension looks very tempting.
Security check woes
A couple of weeks ago I wrote of my experiences with Nationwide customer services, which refused to send a new card to the home I have occupied for 19 years because I did not know my overdraft limit.
Reader Brian King had similar problems when he tried to cancel a cheque. Like me he did not have a clue about his overdraft limit.
He said: “It is a joint account opened 20 years ago and my wife deals with it.”
He could not name regular transactions, but he did know which bank accounts he held – and that his wife worked for Nationwide for 28 years.
Not good enough. He failed security checks.
This was for cancelling a cheque – not asking for money! Sort it out Nationwide.
Tony Hazell writes for the Daily Mail's Money Mail section
t.hazell@gmail.com
