95% of freelancers want Government to set its sights on big business.

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Recently, the leader of the Liberal Democrat Party, Vince Cable, called upon the Government to focus on the tax dealings of big businesses, instead of its clear and continued assault on the self-employed.

This is a sentiment echoed by 95% of freelancers and contractors who believe it is time large corporations faced the same kind of scrutiny when it comes to tax that the self-employed have been forced to endure in recent times.

Vince Cable's comments came soon after the Paradise Papers shone an unsavoury light on the tax dealings of a number of global businesses, including Apple, along with several highly wealthy UK individuals.

In Parliament, Mr Cable made the case that big businesses are given greater leniency by the Government compared to the self-employed.

"At present, a big crackdown is taking place on what are called IR35 companies. These are contractors for the health service, and they are often software specialists. There is undoubtedly a certain amount of tax avoidance in relation to national insurance, but these companies are being pursued in a highly aggressive way that the Government do not use in pursuing much bigger fish," he said.

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Unsurprisingly, this feeling is echoed by almost all freelancers and contractors surveyed by Qdos Contractor. As the Government continues its damaging plan to stamp out what they consider to be wide scale tax avoidance from the self-employed, 92% of independent workers believe they are seen as a soft target.

Seb Maley, Qdos Contractor CEO supported Mr Cable’s comments, and urged the Government to think carefully about how they treat freelancers when it comes to tax.

"We are in total agreement with Vince Cable here. The Government must do more to stop big businesses from suspected tax avoidance. Promises to do so have not been carried out, and unsurprisingly the self-employed are feeling unfairly targeted.”

Recent and potential changes to IR35 and the tax system has understandably dented freelancers’ confidence in the Government, with 65% stating they do not believe the UK has a pro freelancing Party in power.

Previous to this, 32% of independent workers revealed they see the complicated tax system is the most difficult aspect of self-employment, while 95% believe recent tax changes are reducing the benefits of working self-employed.

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Given the growing size and influence of the UK’s self-employed workforce, surely it’s time the Government committed to improving the landscape for freelancers and contractors?

"This Government has a long way to go to win back the support of the independent workforce which, together contributed £119bn to the UK last year. When it comes to tax, big businesses must face the same scrutiny from HMRC that independent workers are made to endure," Seb Maley explained.

Do you also believe the Government is letting big businesses off the hook?

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How confident are freelancers about their business?

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You could forgive independent workers for suffering a crisis in business confidence. 2017 so far has arguably been defined by Brexit uncertainty, changes to IR35 in the public sector and mounting speculation that reform to this confusing tax legislation with reach to the private sector too. 

Just published IPSE research suggests that despite a gradual increase in freelancer and contractor confidence in Q3 compared to Q2, independent workers’ optimism surrounding the economy and their own business remains relatively low.

Government policy and Brexit impacting confidence.

Freelancers are strong in their belief that their business prospects are being hampered by the Government’s policy decisions impacting the self-employed, which include Brexit and regulation changes to hiring freelancers.

75% believe Government policy is having a negative effect on their business prospects, while 67% think their business performance is being impacted by recent and potential changes to IR35. Unsurprisingly, 57% see Brexit as a contributing factor.

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Reputation and collaboration driving business performance.

Freelancers have identified the importance of establishing a brand and building their personal reputation, with 63% confident it will enhance their business performance. 49% of freelancers believe collaboration with other independent professionals who share complimentary skills is important, while 48% are confident that providing innovative services and solutions to clients will improve their business. 

Business costs to rise?

Just 2% of freelancers expect business costs to fall, compared to the 82% who expect them to increase by anything up to 11%. 16% expect no change in costs associated to running their company.

Day-rates drop, but sit higher than 2016.

In Q2 of 2017, freelancer day-rates had increased by 5% since the beginning of the year. These gains have been lost in Q3, with a 7% decline. That said, freelancers’ and contractors’ average daily earnings still sit at £489 – a figure up £86 compared to Q3 in 2016.

Freelancer capacity falls, but remains high.

Despite being slightly down on Q2, freelancers’ capacity sits at 80%, a figure up in comparison to this time last year. This means eight out of ten contractors are working 10.4 weeks out of a possible 13 in one quarter. IPSE suggest that the availability of contracts has perhaps fallen in more highly skilled and better paid positions, and increased in the lower paid freelancer roles.

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As a result, earnings drop.

Low business confidence has no doubt influenced a fall in freelancer earnings, as their day-rates decrease and capacity drops off. However, it's worth bearing in mind that compared to Q3 2016, earnings are in fact up by 30%.

Economic confidence improves but remains negative.

Unsurprisingly, freelancers’ economic confidence sits critically low. Since the result of the EU referendum, independent workers have shown little optimism surrounding the economy. Despite economic confidence increasing marginally from -34.0 to -20.4, a large majority of freelancers are bracing themselves for the UK economy to worsen in the next three months.

Freelancers and contractors are clearly concerned about the current forces at work which are now impacting their business. As we head into the final 6 weeks of what has been a turbulent year, perhaps it's time for the Government to truly consider the implications of policy changes aimed towards the UK's independent workforce.

How confident are you with regards to your business prospects?

 

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Is it time to fix pensions for freelancers and contractors?

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Without the benefit of employer pension contribution, UK freelancers and contractors must make their own plans when it comes to preparing for their retirement.

The state pension, which the self-employed are entitled to, amounts to around £160 a week, nowhere near enough to allow many independent workers to live the life they aspire to when they finally stop working.

And increasingly, the self-employed are looking at alternative ways to save for their futures. Research from the Pensions Policy Institute (PPI) has revealed that just 18% of independent workers believe pensions are the safest way to save for retirement. At 53%, more than half would prefer to invest their money in property, which they believe is a safer and more profitable method of saving.

But for many self-employed people, particularly the younger generation, buying property is proving difficult. The UK housing crisis combined with the difficulty freelancers face securing mortgages makes this hard to do. 

PPI research points out that there is a stark difference between self-employed millennials who do not believe they are saving enough, and the older generation of freelancers who typically own property and don’t expect to rely on income from their private pension pots.

21% of the self-employed are confident financial savings are the best way to prepare for retirement, while 7% simply aren’t sure how or where to make the most of their money.

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With just 12% of self-employed people saving into a private pension scheme, freelancers and contractors are falling behind their employed counterparts when it comes to building a healthy retirement fund. Despite freelancers and contractors typically catching up with employees’ retirement savings in later life through property wealth, it’s clear the current pension system doesn’t quite work for the self-employed.

PPI recently explored ways to make pensions for the self-employed an altogether more attractive and lucrative way to save for tomorrow. 

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One possible way to increase the number of freelancers saving into pensions would be to extend the successful features of automatic enrolment to include the self-employed. PPI put forward the case to consider making it a legal requirement to contribute a minimum amount each month. This could apply to sole company owners such as freelancers and contractors, and out to organisations who employ others but still work self-employed.

This would be more suited towards millennials who – by their own admission – are not saving enough for their retirement. However, there are fears that any move to enforce this would act as a barrier to self-employment and restrict freelancers’ financial freedom and choice.

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Maintain existing workplace pensions.

A second possible avenue to consider would be to maintain contributions into a workplace pension if, for example, an individual leaves the workplace to go self-employed. This would only work for one time employees with a workplace pension however – which would then be converted into a personal pension once the individual has gone solo. 

Given freelancers’ general reluctance to save into personal pensions as it is, PPI fear the take-up would be low with independent workers unhappy about this being made compulsory.

Create better alternative products.

PPI’s third and final policy option outlines the need for a greater number of alternative products that facilitate long-term saving. These might not even necessarily be specific pension schemes.

ISAs are considered smart ways to save for your future. Save £4000 a year in the newly introduced Lifetime ISA (LISA) until you’re 50, and the Government will contribute £1000 per year to your savings – which acts in a similar way to tax relief on pension contributions.

Given a collection of alternative products already exist, the charges, eligibility and accessibility of them would need to be carefully considered if they were to be promoted as a pension alternative and not just another method of saving.

It’s estimated that nearly 3million of the UK’s 4.8million self-employed people do not currently save into a pension. With the independent workforce consistently growing, it's clear the time to re-evaluate pensions for freelancers and contractors is now.

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