Autumn Statement 2022: Chancellor Jeremy Hunt 'abandons' self-employed
The self-employed went totally missing in chancellor Jeremy Hunt’s Autumn Statement 2022, with no single measure seemingly aimed at supporting sole traders or freelancers.
Quizzed yesterday by FreelanceUK, advisers to unincorporated businesses struggled to cite any of Mr Hunt’s announcements as supportive of self-employment or independent working.
Seb Maley of Qdos said the chancellor “abandoned” people who work for themselves, despite them being “critical” to Hunt’s stated priorities yesterday -- “stability” and “growth.”
'No freelance-friendly measures at Autumn Statement 2022'
Speaking to FreelanceUK, Matt Fryer of Brookson confirmed there were “no specific measures to incentivise” freelancers, or even flexible working, in the so-called Green Book.
And despite the Policy Evidence Centre at innovation body Nesta planning an analysis of Autumn Statement, exclusively for FreelanceUK, PEC will have a tough task on its hands.
In fact, a search of the chancellor’s 70-page Green Book for the term ‘self-employed’ returns ‘No results,’ with the words ‘sole trader,’ and ‘freelancer’ also absent in the document.
'Very smallest traders are first targets'
“We need to raise tax to pay for vital public services, but time and again it seems our very smallest businesses are the first targets,” regrets Andy Chamberlain, policy director at IPSE.
He added: “We’ve already seen the number of self-employed fall dramatically since the pandemic – [but] the government seems intent on reducing that number further.”
In the worst possible way, however, ‘self-employed’ numbers might actually increase, indirectly due to Mr Hunt yesterday vowing to increase the National Living Wage.
'False self-employment risk'
Scheduled to rise by a hefty 9.7%, the new NLW could be so high for employers already feeling the pinch, that they will categorise their workers as self-employed, to avoid paying it.
The Low Incomes Tax Reform Group warns: “Some employers may try to avoid these extra costs by turning to the ‘false self-employment’ of workers”.
“False self-employment,” added the group, a charity, “is treating a worker as self-employed when the true nature of his/her engagement is that of employment.”
'Hunt penalised entrepreneurs who take dividends'
When self-employed workers want to formalise their one-person operation, incorporating their sole trader business to become a limited company is the most common step.
But limited companies were directly hit by the chancellor yesterday, as the amount in dividends pocketable ‘tax free’ is to be halved to £1,000 from April 6th 2023.
While dividend rates were not increased by Mr Hunt (beyond a 1.25% points increase he reinstated last month), he said the allowance would fall further, to just £500 from April 6th 2024.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, says the chancellor effectively “penalised entrepreneurs" by making their dividends more taxing.
'Unnecessarily complex and costly'
But it’s not the only rub for limited companies.
Buried in the Autumn Statement’s full report, a policy costings table makes clear that divisive reforms to IR35 will remain in force.
This quiet reinstatement of the 2017 and 2021 off-payroll rules – which Mini-Budget scrapped for being ‘unnecessarily complex and costly’ – doesn’t sit well with IR35 advisory Markel Tax.
'Freelancers needed more than ever to recover from now underway recession'
The advisory’s Danny Batey told FreelanceUK: “HMRC needs to provide evidence that the off-payroll working rules have reformed the market, not merely become an effective restraint of trade for genuine [freelance] contractors.
“[The off-payroll framework in both the public and private sectors] must work equitably for all parties, and we hope that this will be achieved in the next few years.
“This government needs to ensure it creates the right framework, because when we come out of recession [which the chancellor confirmed yesterday is now underway], we will need [freelancers and] contractors more than ever.”
'Freeze to £85,000 VAT threshold will deter business growth'
VAT is another area of taxation that Mr Hunt is being criticised over because his Autumn Statement left it alone yesterday.
“Stealthily freezing the VAT threshold at a time of sky-high inflation will both drag more struggling small firms into scope for the tax,” complains the Federation of Small Businesses.
And keeping the VAT threshold at £85,000 is the chancellor also “disincentivising” other enterprising-types from expanding, said the federation’s national chair Martin McTague.
In with the charge against Mr Hunt by the FSB boss, 24 per cent of small traders and the self-employed have admitted to the federation that they feel “held back” by the VAT threshold.
'Few saving graces'
More positively – but serving to underline just how bereft of support for small businesses the Autumn Statement is, McTague said the “few saving graces” yesterday were the Employment Allowance being retained, and the continuation of the lower self-employed National Insurance rate.
Yet potentially offsetting the relief of smaller NI payments to HMRC, the LITRG is warning that some self-employed recipients “may not see the full value” of a 10.1% rise in benefits by Hunt – including on Universal Credit -- from April 2023.
“This is because the artificial minimum income floor that is applied to some low paid self-employed claimants in universal credit is directly linked to the minimum wage which will also rise from April 1st 2023,” the group said.
'May catch out self-employed who can't boost income'
LITRG’s Victoria Todd added: “This may well be detrimental for those self-employed workers who cannot simply increase their income in response to a minimum wage increase, and is yet another complicated interaction between various systems that may catch people unaware.”
At Autumn Statement, Hunt hiked the national living wage for people aged 23 and over by 9.7% to £10.42 an hour from April 1st 2023, and maxed out the national minimum wage to £10.18 an hour (reserved for 21-22 year olds).
But even the chancellor’s help for the low-paid could make the tiny businesses of those who take them on no longer viable.
'Could mean the end'
“Many small businesses owned by self-employed people simply can't afford the minimum wage increase,” says IWORK’s Julia Kermode.
“They often don't pay themselves any sort of wage and, alongside rising energy bills and inflation, this additional staff cost could mean the end for them.”
A former CEO of the Freelancer & Contractor Services Association, Kermode accused the chancellor of missing an opportunity yesterday to help people who work second jobs to “make ends meet.”
“Few people work multiple jobs for fun – they do it to survive,” she said. “Lowering tax and national insurance contributions for this growing group would have made a huge difference.
“Given that millions of Brits now have side-hustles – to boost earnings at this tricky time – [Hunt] could have raised the trading allowance.”
Under current rules, individuals are permitted by HMRC to earn £1,000 on the side before tax becomes due on it -- a “miniscule” amount, says Kermode who wanted it increased to £3,000.
'Personal allowance frozen until April 2028'
The IWORK boss joins the long list of advisers to freelancers disappointed at Autumn Statement’s threadbare offerings and, as a business owner herself, the swathes of tiny traders shocked at being left with next to nothing.
The personal ‘tax-free’ allowance was quite recently one area which chancellors of the day liked to beef up at Budgets.
But true to the rest of his Green Book which contains a near-even split between tax rises and spending cuts to the tune of £55billion, the chancellor said the £12,500 allowance will stay frozen for the next six years (until April 2028).
'Bruised, undervalued, but likely to be able to strategise'
“Freelancers and contractors just like small to medium-sized enterprises will be feeling bruised,” Workwell’s Chris James reflected to FreelanceUK.
In his exclusive statement last night, Mr James added: “The government doesn’t seem to value the way they work. Or the spirit that leads them to set up their own business in the first place.”
Helen Christopher, chief operating officer at Genie Accountancy agrees – but sounds determined to not let the self-employed go as unsupported as they probably feel right now.
A chartered accountant, Ms Christopher said: “Unfortunately Autumn Statement 2022 had very little good news for small business owners.
“[But] we will be working hard with all our clients to plan for the tax efficiencies in light of all the [chancellor’s] changes. Whether we look at mitigating taxes or ways to increase profits, there is always a strategy to be found.”
18th November 2022