Autumn Budget 2021: predictions for freelancers and the self-employed

In more than one sense, coronavirus has proved to be the ultimate leveller and it’ll be true of Autumn Budget 2021 too, because all enterprises, whether they are large like corporations or tiny like freelancers, will be looking to the chancellor for help to recover from the pandemic.

The NHS repair Budget?

But as to specific measures to be announced which will impact sole traders, it might not be easy for Rishi Sunak to tie his offerings to the structure most favoured by the self-employed. After all, a freelance theatre assistant has probably had a very different 19 months to a sole tradership supplying the NHS!

Only very recently, there was a strong and tangible consensus among the public that greater assistance was needed for the health service and this is likely to be a firm basis for tax changes that Mr Sunak won’t likely forget in a hurry, writes chartered accountant Graham Jenner, co-founder of freelancers’ tax advisory Jenner & Co.

In fact, last month’s announcement by prime minister Boris Johnson of the introduction of a 1.25% Health and Social Care Levy from April 2022 (with the revenue raised being fenced for reforms to the care sector and NHS funding), was a specific response to the crisis which all of the UK has been through.

A big tax 'levy' affecting freelancers is already waiting in the wings

However, calling it a ‘levy’ but basing it on National Insurance Contributions (and the dividend tax which freelance company owners pay), may have left the chancellor with little room to hike income tax and NICs any further, at least in the short term, to provide the still much-needed funds to cover the costs of Covid-19 support measures, like the Self-Employment Income Support Scheme.

Following the introduction of the Health and Social Care Levy, we may see further ring-fenced levies from this government. Many countries have a number of separately identified elements to their social security contributions. So could the PM’s new levy which is already set to increase self-employed national insurance be a sign of things to come for the UK? Not this year, but in the future, maybe.

Will Autumn Budget see a windfall tax?

Meanwhile, some individuals may be hoping that a ‘windfall tax’ charge on those businesses that have enjoyed significant increases in profitability during lockdown will be introduced as a fair way to fund some of the costs of the support measures given to those who suffered a reduction in income since March 2020. 

However, actually identifying who those businesses are is no easy task for Mr Sunak, HM Treasury or HMRC. And anyway, just because a business did well during the difficulties, does not mean that the business specifically benefitted from the lockdown. 

For these reasons, I do not think we will see a ‘windfall tax’ announced at Autumn Budget, as populist as it might be.

Change of basis period may help (HMRC receive your tax payments more quickly)

One already tabled change affecting self-employed people, unincorporated businesses and partnerships which won’t add to the Treasury coffers but may get money into the exchequer faster, is a July 2021 proposal to bring forward the basis on which tax on trading profits is calculated. If it gets the all-clear on Wednesday, the plan will effectively mean such businesses would suffer taxation in the year that their profits arise, not in the accounting period ending in that tax year, effective from 2023-2024.

From what we as advisers to enterprise are seeing, it will likely take some businesses a long time to recover from the effects of the pandemic and the government restrictions introduced to tackle it.

An impossible task...

But, even if the chancellor does have the will to provide further support (and, significantly, a revival of the SEISS is not being called for by Britian’s biggest business support group), identifying those specific outfits in need is problematic.

Successive lockdowns have led many workers, and perhaps freelancers more so, to readdress their work-life balance. Differentiating between those suffering a long term drop in business, from those who have simply chosen to do less business looks like an impossible task for Number 11 Downing Street on Wednesday.

As to targeted relief which the chancellor’s Red Book could contain this Autumn, the continuation of the lower VAT rate for Hospitality and Tourism (beyond April 2022) has to be the favourite. 

Slim chance for sector-specific freelance help

However, the chances of any other sector-specific assistance which then positively affects self-employed freelancers -- directly -- looks very slim. 

That said, measures to deal with very visible labour shortages, to improve green incentives, and other announcements supportive of the Conservative Party’s ‘Build Back Better’ plan, all have the potential to feature on Wednesday, and have the potential to indirectly increase demand for freelancers.

Editor's Note: Check back on FreelanceUK on Thursday for coverage and analysis of all the big Autumn Budget measures affecting freelancers.