Two meaningful nods to the self-employed in his speech and a raft of small but supportive measures in his Red Book point to a generally positive Budget for freelancers by George Osborne yesterday.
The chancellor said he would support such one-man bands by axing Class 2 NICs, and by giving them access to a LISA, a new savings vehicle for the under-40s whereby the governments invests £1 for every £4 saved.
“For the self-employed, it’s the kind of support they simply cannot get from the pensions system today,” Mr Osborne trumpeted, seemingly unaware of his implication that the pensions system is failing freelancers.
Three million freelancers boosted
Of the abolishment of Class 2 NICs, the chancellor explained that he would deliver on a Tory manifesto pledge to cut tax by at least £130 each for 3million people who work for themselves.
Although it was already known about before yesterday, the riding of Class 2 NICs is being welcomed by IPSE, the freelancers’ trade body, which points out that the liability should be removed from the tax system by 2018.
The body is much less enthused that entrepreneur Julie Dean’s recommendations on self-employment, commissioned by the government, were not taken forward at Budget 2016.
“The government missed the perfect opportunity to back self-employed mums by giving them the same maternity pay as employees,” says IPSE’s chief executive Chris Bryce.
Freelancing mums overlooked
“This measure was recommended in the recent self-employment review. The UK’s 270,000 freelancing mums will feel overlooked.”
Also overlooked – or rejected – were appeals by contract workers’ supporters to shelve or scrap the removal of tax relief on certain expenses for ‘Supervised, Directed or Controlled’ workers who use intermediaries.
Similarly, a new dividend tax will go ahead, as will a proposal leaked before the Budget to make public bodies responsible and liable for the tax and IR35 status of one-person companies they engage.
Like IPSE, the Freelancer & Contractor Services Association is objecting to the pushing ahead of this overhaul to how taxpayer-funded bodies, such as the BBC and Channel 4, can use external talent.
‘Pay-as-you go’ tax system
However the enforcer of the new rules, HMRC, was yesterday told by the chancellor to offer a tax helpline and online forum dedicated to small traders, new businesses and self-employed individuals.
Alongside landlords, these taxpayers will be offered a ‘pay-as-you-go’ tax payment system, so they can “choose payment patterns that suit them and better manage their cashflow,” the Budget claims.
Referring to HMRC’s digital plans, under which freelancers face updating their online tax records “at least quarterly,” the Treasury also said further options to simplify the tax rules for one-man bands would be explored.
New, improved, extended
Officials added in the Red Book: “The government is investing £71 million to make it quicker and easier for individuals and small businesses to deal with HMRC.
“Customers will be able to contact HMRC quicker and at a time convenient to them, with improved call waiting times, a new secure email service, and phone lines and Webchat open 7 days a week from April 2017.”
Just as thorny an issue as tax for freelancers is Universal Credit. Seemingly aware of both the complications and the criticism it receives around UC, the government has vowed to act.
“[We] will provide self-employed Working Tax Credit claimants with access to business support and extend the mentoring support offered on the New Enterprise Allowance scheme to self-employed Universal Credit claimants.”
In the same chapter, Budget 2016 adds: “The government will also trial face-to-face support from Jobcentre Advisors for self-employed Working Tax Credit claimants, with a view to national roll-out if successful.”
Airbnb and eBay
Not requiring any such test phase is a newly announced allowance for micro-entrepreneurs and sharing economy investors, worth £1,000 each and due to take effect from April 2017.
In particular, individuals with property income (such as via Airbnb) or trading income ( such as via eBay) below the level of the £1k allowance will no longer need to declare or pay tax on that income.
The government reflected: “Those with relevant incomes above £1,000 can benefit by simply deducting the allowance instead of calculating their exact expenses.”
The Institute of Directors says it backs the allowance, which is likely to help with power tools, driveways and loft storage, but regrets it is for a “very low” amount.
Meanwhile, the Budget announces that a system of streamlined amounts – the simplified expenses regime – is to be altered, so that partnerships can fully access the provisions in respect of the ‘use of a home’ and where business premises are also a home.
Likewise, in that it affects partnerships too, there will be a government consultation on how such structures calculate their tax liabilities, with a focus on areas where their taxation “could be seen as uncertain.”
Elsewhere in terms of taxation, the Budget says that nearly all of the recommendations by the Office of Tax Simplification from its review of small companies will be accepted or considered.
Just another cost of doing business for yourself
Two of the review’s sole trader-style proposals, a ‘look-through’ tax system and a new asset protection model for the self-employed, will go ahead too, albeit just for further exploration via the OTS.
Less positively, Budget 2016 announces a tax increase on insurance premiums – denounced by IPSE as “just another cost to doing business if you work for yourself.”
But helping to offset those costs is a range of personal finance measures. The tax-free personal allowance is increasing, for example, standard ISAs will stash up to £20,000 and the duty on fuel will be frozen, as it will on beer and whisky.
Misc for creatives
Other announcements at Budget 2016 with the potential to affect freelancers and creative freelancers in particular, include:
· The government will push on with HS2, Crossrail 2 and the Manchester-Leeds high speed rail link.
· Corporation tax for businesses (both large and small) will fall to 17% by 2020.
· A new tax relief will be introduced to encourage museums and galleries to develop creative new exhibitions.
· The government will also broaden the eligibility criteria for the VAT refund scheme for museums and galleries.
· The government will help to fund an expansion of the Royal College of Art in Battersea with £54 million funding to 2021-22.
· The government confirms £27,000 of funding per year from 2017-18 to 2019-20 towards the Lloyd George Museum in north Wales.
· A £2 million injection will be made available to refurbish the Hall for Cornwall in Truro.
· Funding of £13 million will go into Hull’s City of Culture, a new Shakespeare North theatre in Knowsley and £14 million for the STEAM house in Birmingham.
· The Cathedral Repairs Fund will be extended by an extra £20 million.
· A new Broadband Investment Fund to support alternative broadband networks will be set up, as will the delivery of a 5G strategy in 2017 so that the UK becomes a world leader in 5G.