Freelancer’s Question: Are my personal finances as a relatively well-heeled freelancer likely to alter as a result of Budget 2014 later today, or will it be a case of 'as you were'? Changes to my mortgage, pension and other investments could be just as unpalatable as anything further on IR35 and tax avoidance.
Expert’s Answer: Pensions is one area of personal finance where we hope the chancellor doesn’t make any further changes, especially to the annual and lifetime pension allowances, as these are already dropping to £40,000 and £1.25m respectively, from April.
Hopefully, George Osborne will take into consideration that freelancers haven’t had the luxury of cosy public sector pensions or large company pensions bubbling away since their 18th birthday. As a consequence, freelance professionals may be now playing catch up when it comes to building a nest egg. Any further restrictions on the annual or lifetime allowances would severely limit the freelancer community -- skilled workers the economy needs who mustn’t be penalised for focussing on building their businesses and coming late in the day to looking at retirement needs. As regards other ways to build a nest egg, our latest guidance on ISAs, published by ContractorUK, may be of interest.
In terms of mortgages, we hope that the chancellor doesn’t use his 2014 Budget to interfere with Help to Buy, not least because we don’t agree with commentators who say this initiative is inflating an asset bubble. The vast majority of Help to Buy applicants are not buying in the central London hotspots, which are behind all of the negative headlines about what is, in our view, an excellent initiative. Cancelling Help to Buy would cut off a vital lifeline to the regions and people most in need of it.
You mention tax avoidance, which Mr Osborne is probably a bit red-faced about. We call on the chancellor to ensure that contract, freelance and other genuinely self-employed professionals do not become the victims of ‘friendly fire’ in the tax authority’s war on false self-employment, aggressive avoidance planning and contrived structures. Mainstream freelancers and contractors pay their fair share of tax, typically via a limited company or onshore payroll firm if they don’t operate as a sole trader, and so shouldn’t be penalised for the actions of a minority. Recent moves relating to IR35, whether it is the ‘office holder’ amendment or the Personal Service Companies Committee, have caused a huge degree of uncertainty and angst among freelancers, as has the proposed ‘pay-up first’ avoidance rule. These flexible workers really do have enough existing and incoming measures to contend with. So the chancellor should be extremely sensitive of announcing anything new today that has the potential to harm confidence among such independent professionals, whom he should recognise as crucial components in the engine for economic growth.
expert was Tony Harris, founder of IFA ContractorMoney.