IFS Says 750,000 People set to pay 40% Tax from April 2011 Onwards
The effects of the change are expected to see the middle classes hit the hardest with the Institute for Fiscal Studies estimating that on average households across the United Kingdom will have to pay an additional £200 in 2011 / 2012. The changes are bad news for many households who have already seen prices increase significantly. The Shadow Chancellor, Ed Balls, said last night \”I do not think that Mervyn King (the Governor of the Bank of England), in his heart of hearts, really believes that crushing the economy in this way is the right way to get the economy moving.\”
Professional Contractors across the UK (especially those using PAYE Umbrella Companies), will feel the pinch once the new tax bands come in. Many could be encouraged to move from their Umbrella Companies to their own Contractor Limited Companies (if they feel comfortable they will be outside of the IR35 Legislation).
Recently the Office of Tax Simplification (OTS), the body set up in July 2010 by the Coalition Government to identify & simplify individual & business related tax complexities, said that it is on track to deliver its initial report to the Government in time for the 2011 Budget. The body, an office of the HM Treasury, recently completed a series of events around the United Kingdom which looked at the problems everyday businesses and individuals face. The road-show included meetings with professional contractors affected by the IR35 legislation (reportedly a top priority for the office).
John Whiting, the Tax Director for the Office of Tax Simplification, said that \”I am delighted that these events were so well received and stimulated such valuable debate amongst those attending. That is exactly what we hoped for as we seek input to help us simplify Britain\’s tax code as openly as possible. Some points we had already identified, but others provided real food for thought – it\’s important we consider all ways to making taxation for small businesses in particular a little easier. I would like to thank all those who attended, and would like to remind anyone that couldn\’t make it, or anyone who has further ideas that we continue to welcome views on making small business taxation simpler for all.\”
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