Taxes

Spare a thought for Mrs McClafferty & Co. Like thousands of small business owners, she has spent years managing things the old-fashioned way: jotting down figures in a Silvine cash book, stuffing receipts into a shoebox and sorting it all out when the tax return comes around. But according to HMRC, taxpayers like her are partly responsible for a £24 billion black hole in UK tax receipts. Which means the taxman is coming for them. If you are self-employed and had an income of more than £50,000 last year, get ready for Making Tax Digital (MTD). From 6 April, you will have to file an income and expenses update four times a year, then an adjustment, then the annual return. You must use HMRC-approved software to do it all.

On what he called “Liberation Day,” President Trump announced a new tariff schedule. While the markets had been up in anticipation, they are down sharply, with the Dow dropping 2,200 points, perhaps surprised by the extent of them. Basically, Trump has laid tariffs equal to about half what other countries charge on US exports, inviting them to lower theirs in exchange for reciprocity. What the final result will be is anyone’s guess, for the Trump tariffs are chips in a high-stakes game of international poker. They have already had an effect. Canada has promised retaliatory tariffs while Israel has dropped all tariffs on US goods. A tariff is a tax laid on goods passing through a port.

George Osborne dreamed about it and Rishi Sunak told friends that he’d like to do it if everything went well and he was feeling brave. But this morning Kwasi Kwarteng has gone ahead and done it.  The ‘additional rate of tax’ – set up by Gordon Brown as a trap for the Tories in 2009 – has just been abolished. Right now, those earning more than £150,000 per year will pay 48.25 per cent on every pound they earn (45 per cent income tax plus 3.25 per cent National Insurance). From April next year, it will fall to 42 per cent (40 per cent income tax plus 2 per cent NI). A double tax cut: the additional rate goes and NI is also cut. So the biggest tax cut of Kwarteng’s ‘mini-Budget’ has gone to the very richest.

Here’s the Rishi Sunak paradox: he proudly defines himself as a low-tax Tory but under his watch taxes are reaching a 71-year high. There are plenty of Tories who want to ditch next month’s National Insurance increase but Sunak is firmly opposed – mainly because he wants to link up in people’s minds that more money for the NHS and social care doesn’t manifest out of thin air. But pressure is on at tomorrow’s spring statement to make clear what kind of Chancellor he really is. Does he come from the long line of Tories who like tax cuts in theory but not in practice – or does he have another agenda? Sunak’s starting position is that to cut tax, you need to restrain spending. For the Chancellor, it’s a simple point about trade-offs.