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Tax Tip

Income tax target set to be missed

The Office for Budget Responsibility (OBR) has warned that income tax is likely to fall short of the government's target for this financial year despite record employment numbers.

The OBR said that many new jobs were low paid or created through low-paid self-employment.

OBR chairman Robert Chote told the BBC fewer revenues were coming in for each new pound earned.

Tonmoy Kumar, Manager of the Accounts Department of ABDS comments:
“The first £10,000 earned a year is free from income tax, but figures from HM Revenue & Customs show that of the growing number of people who work for themselves, 35% of them earn less than £10,000 a year. This has increased from 2008 when 20% of self-employed earned less than the prevailing tax-free allowance.”

Official figures show there are currently 30.61 million people in work, 73% of the population. Just over 2.02 million people are unemployed, 6.2% of the workforce, the lowest rate since 2008.

But growth in average weekly earnings still lags behind inflation.

Mr Chote said: "This continued story of earnings growing less rapidly than expected and employment growing more rapidly than expected does perhaps suggest that we are more likely to be disappointed than over-achieve on income tax receipts this year."

Last month, the Bank of England halved its forecast for average wage growth in 2014 to 1.25%, leading some commentators to believe it is under little pressure to raise interest rates any time soon.

If you need any help and advice with your Tax compliance and planning, or you wish to know more about the ABDS tax Investigation Service, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help in all your financial planning and business advice.

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

Brilliant with numbers   
Great with people  
Clear and precise with advice
Timely and cost effective 
In touch with issues that face our clients and
mindful of their long term strategic goals

Helping Your Business is Our Business

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