Spring Statement 2022: Self-employed braced for no tax respite from Rishi Sunak

The self-employed are far from optimistic that chancellor Rishi Sunak’s Spring Statement 2022 will contain anything for them tomorrow, either as individuals or business-owners.

Much of the gloomy expectation that freelancers won’t be helped by Mr Sunak stems from the government’s unwillingness to axe the 1.25 percentage point increase in National Insurance from April.

Speaking yesterday, the Association of Independent Professionals and the Self-Employed said that given the cost of living crisis, they have formally asked HM Treasury to delay the increase.

'Now is not the time to hit the self-employed'

IPSE’s Andy Chamberlain told FreelanceUK: “Following the rising cost of food, energy and household goods…now is not the time to increase taxes on thousands of self-employed workers.

“We are therefore calling on the chancellor to announce a delay to the planned increase to National Insurance during this week’s Spring Statement.”  

Two weeks ago, it looked like IPSE had more than succeeded -- after the House of Commons approved a motion to not just shelve, but outright cancel the NICs hike.  

'Tough and responsible'

But ministers quickly dismissed the non-binding motion, saying the underlying Health & Social Care Levy is a “transformative” policy.

Treasury minister Simon Clarke also said that the “tough and responsible” decision to put up NICs had, in effect, already been made.  

Seb Maley of Qdos, which advises on IR35, says the NICs increase will be transformative in another way -- it will “exacerbate the cost of living crisis” for those already reeling the most.

“Freelancers, contractors and millions of other self-employed people have been hit hardest by tax reforms -- not to mention the pandemic -- in the past few years.”

'More pain'

Mr Maley also said: “The government ignoring the motion passed by MPs to scrap next month’s changes will inflict more pain on this vitally important sector of the workforce.”

And that pain is acute yet due to how some freelancers operate out of sight, it’s easily overlooked by government, according to tax lawyer Rebecca Seeley Harris.

Boss at ReLegal Consulting, she yesterday told Times Radio: “We are individuals in our own right and a lot of us [self-employed] will be working from home. So even things like the cost of heating an office for the day [is significant].

“Whereas, for an employee, they can just go to work and have a heated office. That might not seem like much but heating an office constantly is quite a lot [financially].”

'Most anti-business administration in memory'

She added that with business events reopening from covid, and conference season also gearing up, “fuelling” vehicles is also more significant for freelancers who need to travel.

Even so, the current government -- what the tax lawyer described as the “most anti-business administration” in her memory, is unlikely to reverse the planned NI rate rise.

“The chancellor may raise the NICs primary/profit threshold,” Ms Seeley Harris posted online, after her interview.

“But this still won't help. And actually, I doubt there will be any help specifically for the self-employed…[including no] reversal of the decision on the NICs rate rise.”

'Yet another cost on the self-employed'

Effectively in force from April 6th, the new levy will apply in a similar way to Class 4 NICs, in that it will be payable on any self-employed profits which exceed the lower profits limit.

Law firm Chartergates also said in an advisory: “Where a person has reached the state pension age before the start of the 2022/23 tax year there won’t be any liability to pay.

“It will kick in the following tax year. However, where a person reaches state pension age during the 2022/23 tax year, liability will arise for that and subsequent tax years. [But] the levy does not and will not apply to Class 2 NICs.”

The law firm confirmed that the levy represents “yet another cost for…the self-employed to bear, not only in terms of the levy itself but also the inevitable associated time” to administer it.

'Financial headspace'

For Mr Chamberlain, who wants the NICs increase cancelled, the rub is that he believes that while costs and time for sole traders are heading into the red, Mr Sunak is being helped towards the black.

“With the ONS finding that the payroll has increased by a further 275,000 over the past quarter, the chancellor has more financial headspace than initially expected to fund the NHS and other essential services - without putting economic burdens onto thousands of self-employed workers,” IPSE’s policy director said.

The association also agrees that fuel duty for freelancers is a strain, and one which the Treasury has the power to relieve at tomorrow’s Spring Statement. 

'Severely damaged freelancer incomes'

Mr Chamberlain explained: “Following the increase in petrol and diesel prices after the Russia sanctions, the chancellor should also consider cutting fuel duty like other countries such as Ireland, The Netherlands and Sweden.

“If he doesn’t announce a change to fuel duty, then freelancers cross the country will find that their income will be severely damaged from travelling to and from their clients.”

But as self-employed herself, Ms Seeley Harris is downbeat about the chances of any respite from Mr Sunak for all independent workers, at the pumps or elsewhere.

'Government lacks understanding of self-employment'

Sounding dispirited, the lawyer, who last year during covid campaigned for financial support for freelance company owners reflected: “There seems to be a lack of understanding within the government about what it is to be self-employed.

“It’s a weird situation to be in – when you’re trying to get help from the government and they are just ignoring that [flexible working] sector. I know a lot of [self-employed] people are very disgruntled.”

 

22nd March 2022

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