Budget twists the knife into UK freelancers and contractors.

Words, hubbul

On the 8th March, The Chancellor of the Exchequer, Philip Hammond, unveiled the Government’s economic plan for the year ahead.

There was a predictable air of caution around The Chancellor’s statement, with the onus on tightening the purse strings and raising revenues for what could be a particularly turbulent and prolonged exit from the European Union. 

As expected, the UK’s 5million or so self-employed workers bore the brunt of many incoming changes to tax. Philip Hammond announced plans to raise revenues from the self-employed – a move which many see as further insult to the independent workforce that contributed £119billion to the economy last year.

Ignoring pressure to delay incoming changes to IR35 in the public sector, The Chancellor announced that this was a budget to "build an economy that works for everyone." Unsurprisingly, the UK’s independent workforce had a few things to say about that.

Tax-free dividends slashed.

The Chancellor revealed the Government is to slash the tax-free dividend allowance by 60% - from £5,000 down to £2,000 from April 2018. This reduces the size of dividend a company director can withdraw from their company or companies by £3,000.  It was an announcement that went down like a lead balloon.

“There is little in the Budget for the micro-business sector to be positive about. In particular, the decision to cut the dividend allowance will be potentially devastating for freelancers and contractors across the UK," explained FreeAgent CEO Ed Molyneux.

The Chancellor argued his case, stating that the reason behind tax increases for the self-employed was the best way to level the playing field. And that Government want to ensure those who working in similar industries in similar roles pay similar taxes - regardless of whether they work as employees, sole traders or through limited companies.

That fell on deaf ears for many freelancers and self-employed people, who feel that the Party who once claimed to be 'the party for small business' has broken their number one promise.

IR35 changes to go-ahead.

For public sector contractors, there was no U-turn from Government on incoming changes to IR35 in the public sector. either. Come 6th April, the responsibility for setting IR35 status will fall on the public sector engager, rather than the contractors themselves - a move which has the potential to see thousands of contractors wrongly placed inside IR35 by their public sector client.

Despite pressure from many leading business voices, The Chancellor failed to address or mention the issue in his hour long speech, suggesting changes are to go-ahead.

“IR35 wasn’t mentioned in The Budget. That The Chancellor chose to ignore the calls to delay 6th April’s changes to IR35 in the public sector isn’t a surprise though. Given the genuine concern over the effectiveness and accuracy of HMRC’s new IR35 tool however, there’s very little time or room for mistakes when setting public sector contractor’s IR35 status - which is concerning,” Qdos Contractor CEO Seb Maley explained.

Businesses below VAT threshold given more time to prepare for Making Tax Digital.

In what might well be remembered as a side note in a concerning Budget for freelancers and contractors, businesses turning over less than the VAT registration threshold of £83,000 a year will be given one extra year to prepare for the incoming, quarterly digital tax returns. 

Before, during and in the post-match analysis, self-employment was at the top of this Government's agenda - just going to show the influence that our way of working carries. In his first few words, The Chancellor signalled his overwhelming support for the UK's independent workforce. "My ambition is for the UK to be the best place in the world to start and grow a business", he stated.  

National Insurance U-Turn.

On the day of The Budget, The Chancellor announced that Class 4 National Insurance was to rise from 9%, to 10% from April 2018, with a further 1% increase from 2019. As expected, uproar ensued. Just 48 hours later, Philip Hammond abandoned these plans, completing a quite spectacular U-turn. 

While the move was welcomed by the self-employed, it left The Chancellor red-faced and humiliated, with a nation questioning the competency of its own Government. Jeremy Corbyn saw the opportunity, labelling The Conservative Party a 'Government in turmoil.'

Whether that's true remains to be seen. There will be inevitable concern among The Cabinet however, that this Government has lost an important portion of the self-employed vote, after what can only be described as an attack on the UK's 5million independent professionals.

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