Freelancers left out in the cold at Spring Statement 2022
In fact, freelance trade body IPSE indicates that Mr Sunak’s repeated mentions of its members yesterday belies how the ‘bottom-line’ for numerous sole traders now looks.
'Worse off, at the worst possible time'
Even allowing for a surprise, welcome lift in NICs thresholds by the chancellor, IPSE’s Andy Chamberlain calculates that “many self-employed taxpayers will still be worse off.”
He told FreelanceUK that despite the lift, under which the self-employed can earn £11,908 in 2022/23 before paying Class 2 and Class 4 NICs, the 1.25% points increase is still going ahead.
“Raising the NI threshold will, to a degree, mitigate the additional burden,” Mr Chamberlain, the Association of Independent Professionals and the Self-Employed’s policy director began.
“[But] with inflation reaching its highest level in 30 years, and household bills skyrocketing, the [1.25% points] hike comes at the worst possible time for self-employed workers.”
'Massively disappointing for the average working person'
On Spring Statement’s eve, the association voiced concern that Britain had not followed some comparable economies by cutting fuel duty, to factor in sanctions imposed on Russia.
Almost on cue, and following thrice daily price hikes at some pumps, Mr Sunak yesterday cut fuel duty by five pence a litre, from 1800 last night and right up until March next year.
However, Ryan Dawson of Kingsbridge Freelancer Insurance still says Spring Statement 2022 was “massively disappointing to the average working person”.
Hinting that the fuel price cut just won’t cut it, Mr Dawson criticised the chancellor’s “lack of grasp and understanding about the gravity of the cost of living crisis”.
'Helping with the cost of living'
In his Spring Statement speech yesterday, Mr Sunak said almost the opposite, speaking of the government “delivering for hardworking families and helping with the cost of living.”
For hard-workers who work for themselves, at least their costs to HMRC should ease from April 2023, as from then, the NICs threshold lift means they can earn £12,570 NIC-free.
And from this April, all self-employed whose profits are below the ‘Small Profits Threshold’ will build up NI credits (to access state pension and benefits) but need not pay Class 2 NICs.
'Welcome step on Class 2 NICs'
“This is a welcome step, as voluntary class 2 NIC has proved administratively difficult,” says the ICAEW, referring to the ‘SPT’ of £11,908 for 2022/23 and £12,570 thereafter.
But aside from ‘administratively difficult,’ it seems that the self-employed themselves continue to be ‘statistically difficult’ – or at least inconvenient, for prime minister Boris Johnson.
Having seven times overlooked self-employment falling by one million, Twitter users yesterday said that pre-Spring Statement, the PM again ‘just ignored’ the freelance drop-off.
Mr Johnson also claimed during PMQs that they were currently 600,000 more people in pay-rolled employment than before the pandemic began (March 2020).
That’s despite No 10 already being told by the ONS that referring only to a jump in PAYE staff, represents a “selective use of data that is likely to give a misleading impression”.
Ironically, a non-discriminatory approach that favours the many rather than the few, is what a tax expert last night said should have been more at the heart of Spring Statement 2022.
'Unlikely to be any comfort'
“A wider VAT cut to boost spending across the board may have benefited everyone -- and boosted the economy,” said the expert, Tom Wallace of WTT Consulting.
“But instead we saw a focused reduction [by the chancellor] to 0% [VAT] on solar panels, heat pumps, and building insulation.
“While the logic behind such a move is clear, particularly with the rising cost of heating our homes, unfortunately given the average cost of an air-source heat pump is £6,000, it will be unlikely to be of any comfort to those currently struggling to keep their head above water.”
'Welcome R&D reform'
Another very targeted measure by Mr Sunak is his vow to boost investment and innovation via reform of R&D tax credits, by clarifying that pure mathematics is a qualifying cost.
But Dr Richard Wilson of TIGA, a trade body for the video games sector, says he welcomes the move, scheduled from April 2023.
The chancellor could have gone, and should have gone further to really boost the gaming sector up a level, however.
Dr Wilson explained his verdict: “The government should also aim to increase the rate of video games tax relief from 25% to 32%. This would create nearly 1,500 additional skilled development jobs and over 2,700 additional indirect staff by 2025.
“The government should also introduce…[a] video games investment fund, which would provide pound-for-pound matched funding, up to a maximum of £500,000, for original game projects.
“The VGIF would create over 1,200 skilled development jobs and indirect jobs by 2025 and increase studios’ investment by £78 million.”
'Signs that HMRC will be policing status'
An even bigger number, £161million, was approved by Mr Sunak yesterday as a shot in the arm for HMRC, so that the tax office can increase debt management capacity -- but also “compliance” -- over the next five years.
Seb Maley at Qdos, which specialises in IR35 warned: “All the signs point towards HMRC policing employment status compliance in 2022.
"And [that includes] whether or not a firm has facilitated what’s known as ‘false self-employment’. This impacts the business engaging the sole trader, in the same way that IR35 does.”
'Self-employed UC claimants struggling'
But it’s the self-employed customers of another government department – the DWP, who IPSE says deserve a different kind of attention from officials.
“The chancellor should have taken the opportunity to suspend the Minimum Income Floor, which would have provided a genuine boost to self-employed Universal Credit claimants,” Mr Chamberlain said.
“[These individuals] are struggling to make ends meet as a result of the cost of living crisis.”
'Not the Spring Statement that freelancers in need wanted'
An accountant to freelancers echoed the concern, signalling that although some lower earning self-employed may eventually benefit from the NICs threshold lifts (the government estimates £250 tax cut per sole trader from July 2022), higher bills for almost everything are biting freelancers.
And they are biting freelancers right now.
“It’s not the Spring Statement people in need were expecting or hoping for,” says the accountant, Sid Agarwal.
Tax director at DNS Accountants, which counts freelancers among it clients, Mr Agarwal added: “There were number of announcements to help with these rising living costs, but were they enough?
“My worry is that they weren’t. And behind the premise of Brexit, the government hasn’t really contained inflation as an issue. Moreover a mini-budget from a chancellor which fails to tackle such an economic threat could be storing up a big problem for freelancers, especially as the small bits of relief announced – including a one pence cut in income tax in 2024 – are all some way off.”
24th March 2022