Chancellor George Osborne is said to be considering a scheme that would allow people to take on additional jobs up to the value of around £314 per month without having to pay tax or National Insurance.
The idea is modelled on a scheme being used in Germany, whereby employees can earn up to €400 a month without giving up any of their salary, and employers pay only a flat rate to cover pensions, social insurance and wage taxes, making administration simpler.
In Germany, people can hold several mini-jobs up to the €400 a month tax-free limit, with the only impact on their income being the reduction of unemployment benefit over a certain threshold, between €400 and €800, workers pay tax on a sliding scale.
Despite being behind the reason why Germany has one of the lowest levels of unemployment in Europe, the scheme has its detractors in the UK, with some critics saying that it ties people into low paid jobs.
However, it is being considered seriously and a colleague of the Chancellor said: “What I can tell you is that this is being looked at in government. There are lots of ideas that are being looked at as part of the deregulation drive, and this is one of them.”
Despite suggestions that the Chancellor is seriously considering the idea, Business Secretary Vince Cable is not keen, with a statement from the Department for Business, Innovations and Skills saying: “This proposal is a German solution designed to deal with particular issues in the German labour market, driven by their relatively high taxes on labour. This is quite different to the situation in the UK.
“The government is already taking action to take more people out of income tax and we are carrying out a root-and-branch reform of labour laws to make business more effective while maintaining protections for employees.”
As an accountant in Bristol, Elaine Durrant specialises in offering tax advice, guidance and support to businesses and individuals.