Budget UK 2017: QROPS and the self-employed
In Philip Hammond’s first Budget, it was announced that the UK government is to introduce a 25 per cent charge on transfers to qualifying recognised overseas pension schemes (QROPS), effective from 9 March.
It is extremely disappointing that the government sees Britons’ pensions as low hanging fruit they can raid whenever they deem it appropriate. It seems to forget that is an individual’s right to transfer their asset to any jurisdiction they see fit and, as such, people should not be penalised should they choose to move it outside the UK for legitimate financial planning reasons.
Despite the move confirmed in the Budget that will make the transfer process more costly for those outside the European Economic Area – for those within it does not change – many of the fundamental advantages and long-term benefits of QROPS for expatriates remain intact. Therefore, QROPS will still benefit many people living, or planning to live, overseas and who have a UK pensions.
Self-employment tax hike
The Budget also punishes ambition, undermines aspiration and will backfire on Brexit Britain.
The Chancellor announced today in his first Budget plans to increase the National Insurance paid by the self-employed.
This tax grab will affect Britain’s millions of hard-working, already over-taxed entrepreneurs. This demographic is the lifeblood of the economy. They shoulder the risks and costs of running a business, whilst at the same time, create jobs and wealth.
Indeed, piling on additional penalties and erecting extra barriers, deters people from setting up new enterprises. These further encumbrances on the self-employed will undoubtedly turn out to be a masterclass in the law of unintended consequences. It will backfire by lessening the tax base to fewer and fewer people.
Furthermore, hiking taxes for the self-employed will urge them to remain in lower-paid employment, as opposed to contributing to the economy productively and more widely, by starting their own businesses. It will hinder investment and job creation – the exact opposite of what is required for sustainable economic growth over the long term.
Naturally, if Britain is going to survive Brexit, the principal objective should be to maintain and encourage more entrepreneurs. In that case, why is the government appearing to drive them away, or compelling them to be less economically productive?
In addition, and what many people will find particularly infuriating, is that Mr Hammond has more scope for ‘giveaways’, as the forecast downturn didn’t happen following the Brexit referendum last June, coupled with the UK economy expected to grow by 2 per cent in 2017.
Evidently, the government needs to plug a hole in its finances in order to help control the social care crisis and other issues. However, slapping a tax hike on self-employed creators of wealth is not the way to do it. In reality, it’s extremely short-sighted and could have long-term, highly unfavourable effects for Britain.