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Philip Hammond will use his Budget on Wednesday to signal contentious plans to extend a crackdown on bogus self-employment to the private sector, as he tries to raise more tax against a tough fiscal backdrop.

The chancellor is considering building on measures to tackle bogus self employment in the public sector that were introduced in April, but he is thought to have decided against rushing the next move.

A public consultation is expected about Mr Hammond’s plans, which are likely to be contentious because they would affect tens of thousands of people in the private sector.

The Treasury is concerned it is losing out on large amounts of revenue because growing numbers of people are operating through personal service companies. Such arrangements are taxed more lightly than traditional employer-employee relationships.

Meanwhile, Mr Hammond, constrained by tight public finances, has also looked at the idea of freezing income tax thresholds — a move that could raise up to £3bn a year by the end of this parliament.

The chancellor will honour the Conservative party’s manifesto pledges to raise the personal allowance to £12,500 by 2020, and the 40p higher rate of tax threshold to £50,000. But he is looking to raise revenue in later years by freezing the income tax thresholds once these manifesto promises have been met.

Another revenue source mooted by the Treasury is a radical shake-up of value added tax rules for small companies that would reduce the £85,000 turnover threshold for VAT to closer to global standards such as the EU average of £20,000. The move could raise up to £2bn a year, but risks a row with small traders.

Mr Hammond needs fresh sources of revenue to fund his Budget priorities of building more homes, alleviating pressure on public services, including the National Health Service, helping younger people and addressing the UK’s productivity problems.

The Treasury is raising more tax through its clampdown on self-employment in the public sector. Workers in temporary positions — such as locum doctors and supply teachers — lost big chunks of their take-home pay after the government took action against those deemed not to be genuine freelancers. The move affected workers who operated personal service companies.

The cost of bogus self employment in the private sector is forecast to rise to £1.2bn a year by 2022-23, according to government figures.

Mel Stride, Treasury financial secretary, made the case for extending the crackdown to the private sector last month.

Meanwhile, among a raft of Budget measures aimed at younger voters will be the creation of a railcard, similar to the existing one for 16 to 25-year-olds, to cover the 4.5m people aged between 26 and 30.

The railcard, costing £30, will provide a one-third discount on fares. The card is expected to come on the market in the spring of next year.

The government is also set to announce an inquiry into the handling of airline collapses after the UK aviation regulator was forced to organise an airlift home for 110,000 people left stranded by the collapse of Monarch Airlines in October.

Mr Hammond is also expected to say that HM Revenue & Customs and the Student Loans Company, the non-profit organisation which provides loans to students, will work together to ensure that those who attend universities and colleges never end up paying more than they owe.

Some 86,000 people overpaid, by an average £592 each, at the end of their loan repayment periods in 2015-16 because of poor co-ordination between HMRC and the SLC.

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