The Institute for Fiscal Studies (IFS) has criticised a system which sees self-employed business owners paying thousands of pounds less tax than employees who are higher earners, saying preferential tax rates for business owner-managers are “unjustified and problematic”. The think-tank says those who run a business can pay themselves in dividends or capital gains rather than salary, with directors also able to use their company to hold cash, allowing them to manage what tax they pay. The IFS said these issues “get into the knotty weeds of the tax system” and “will be a mystery to most people other than tax practitioners, administrators and taxpayers personally affected by them.”
Read more: The Times
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