TPA – Coming For Pensioners And Freelances

Just in case anyone thought they were slacking, the pretentiously titled “2020 Tax Commission”, a dubious convocation of the so-called Taxpayers’ Alliance (TPA) and Institute Of Directors (IOD), has today issued its latest wheeze on reform of the tax system. And lots of pensioners and freelances out there would do well to read it, because the “simplification” urged would potentially cost them a large chunk of their income.

TPA non-job holder Rory Meakin, the usual conduit for news from the “Commission”, suggests once more that National Insurance (NI) should be abolished, in the name of simplicity. So far, so interesting, but then Meakin suggests that employee’s NI is rolled back into Income Tax, making the rate of that tax between 31% and 32%. Then he suggests a further move: to include employer’s NI as well, which would take the Income Tax rate to around 39%.

This would be music to the ears of many TPA supporters, who are very much in the employers’ camp, but for two categories of taxpayer, it would spell disaster. The first of those, and the most vulnerable, are pensioners: many pay Income Tax on their occupational pensions, and to lump both employee’s and employer’s NI into that tax would remove a substantial slice of their income instantly.

Also caught by the TPA proposal would be freelance workers who are not already covered by the hated IR35, a measure that the Tories suggested they might look favourably on rescinding, then seemed to forget. Those freelances who still can, are used to taking some of their income as a dividend payment, and thus get round paying NI of any kind. They would also now have a vastly increased tax bill.

One might have thought that the TPA would have applied some thought to this before pronouncing, but it’s not the first time recently they have appeared not to appreciate that there are folks out there who are not full time or fixed term contract workers. Moreover, this emphasises who really calls the shots at the TPA and the IOD – larger corporates.

Of course, there may be a further proposal for exceptions from this brave new world of simplified personal taxation. But whatever wriggle room the TPA chooses to exert, their true colours, and the extent to which they care for ordinary taxpayers, have now been laid bare.