One-person firms face tax shock

TENS of thousands of self-employed people face soaring tax bills in 2004 after a U-turn by Gordon Brown.

The Chancellor is to close a loophole that he created in which people who work for themselves were offered lavish incentives to turn themselves into one-person limited companies.

Taxi drivers, agency doctors and driving instructors were among those who rushed to incorporate after the 2002 Budget, which abolished Corporation Tax on the first £10,000 of a firm's profits.

Those earning £30,000 could cut their tax bills from more than £8,000 to less than £4,000. But there is evidence that the tax break encourages business people to turn themselves into companies to save tax.

Brown said: 'We will bring forward proposals for action in Budget 2004 to ensure the right amount of tax is paid by owner-managers.'