Chancellor Rachel Reeves is contemplating modifications to the tax system that may result in increased liabilities for certain professions, including lawyers, accountants, and doctors, in her upcoming Budget presentation scheduled for 26 November. The proposed changes would target those who utilize limited liability partnerships (LLPs), as these entities currently allow professionals to be classified as self-employed, exempting them from employers’ National Insurance contributions.
It has been reported that the Chancellor is considering introducing a new tax on LLPs, set at a rate slightly below the current 15% for employers’ National Insurance. This move follows unfavorable economic forecasts and a series of policy reversals related to welfare, which have complicated efforts to adhere to her fiscal guidelines. Reeves has expressed intentions to focus tax increases on wealthier individuals.
Various tax specialists and think tanks have posited that extending National Insurance contributions to partnerships could create a more equitable tax structure. Proponents of this approach argue it would largely impact higher earners. Adam Corlett, of the Resolution Foundation, emphasized that the Chancellor must raise taxes to improve the fairness of the tax system, as current measures favor certain income types over others.
However, the implications of these changes may vary. While NHS GPs cannot operate as LLPs, locum doctors and private practitioners could be affected. The British Medical Association has warned that such changes might significantly impact small, doctor-led practices, potentially leading to higher costs for patients and discouraging medical professionals from entering private practice.
Research from CenTax estimates that imposing National Insurance on all partnerships could generate approximately £2 billion annually, although this figure would likely decrease if limited solely to LLPs. Experts, including those from the Institute for Fiscal Studies, caution that changes might lead to undesirable adjustments in tax arrangements, and could deter some individuals from working in the UK.
Some analysts predict that Reeves will need to either increase taxes or decrease spending by around £20 billion to comply with her financial guidelines, which stipulate that government debt must decline as a percentage of national income by the year 2029-30. Given Labour’s prior commitments not to raise certain taxes, the options to generate additional revenue may be limited.
Source: https://www.bbc.com/news/articles/c0mxwg70gkeo?at_medium=RSS&at_campaign=rss