The Office for National Statistics (ONS) has claimed that the UK’s deficit for August could be partly due to a drop in tax revenue from flexible workers and the self-employed during the month.

Government income dropped by 0.6% last month, while spending increased by 1.6%. This resulted in the highest deficit being recorded for three years, which equates to around £12bn.

There had been expectations that higher tax payments from the millions of contractors and freelancers across the country would ease the deficit, as there is often a tendency for returns to be processed if they were left unfiled during the previous month; however, this did not appear to happen.

The flexible workforce had contributed to the first budget surplus since 2012 in July, as an unexpectedly high level of self-assessment tax returns was received during the month; however, this trend did not continue into July.

Economic experts now expect the government to reduce borrowing this year to compensate for higher deficits, but at a lower rate than the goal initially set by the Office for Budget Responsibility (OBR). An updated budget forecast is expected later this year, which will outline further cuts to reach this target.

The ONS says this year’s figures highlight a changing pattern of payments from contractors and other self-employed individuals. August often enjoys a large spillover of tax receipts, but much fewer additional payments were made during late summer this year.

The combined receipts for July and August were the highest on record, however, which suggests that other factors have had more of a detrimental impact on the UK’s economy.

Crystal Umbrella’s comment:

The combined receipts for July and August were the highest on record, which indicates that other factors have had more of a detrimental impact on the UK’s economy and that contractors should not have been blamed for a single month’s drop in revenue.

The fact that there is a greater consequence for non-compliance resulted in increased revenues in July. The majority of hard-working self-employed workers made their payments on time this year, so it is unfair to rely on a late flurry of payments to prop up the economy.

It also suggests the government is increasingly out of touch with the flexible workforce; a notion that is backed up by the recent 2015 Financial Bill.

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