Osborne's 2015 Budget backs the self-employed
George Osborne yesterday delivered his most explicitly supportive Budget to freelance professionals to date, on top of fresh help for the creative, digital and media industries.
And fortunately for such one-person empires, the mentions they won (four in total) were positive, such as him saying an expenses clampdown must not hit “genuine” freelancers.
Mr Osborne even dedicated his entire Budget to them (among other voters), saying, “This Budget backs the self-employed [and] the small business-owner.”
His showpiece announcement seems to be that “costly, complex and time-consuming” self-assessment tax returns are to be axed, to reduce tax administration for 12million people.
The chancellor said: “Millions of individuals will have the information the Revenue needs automatically uploaded into new digital tax accounts.
“A minority with the most complex tax affairs will be able to manage their account online. Businesses will feel like they are paying a simple, single business tax – and again, for most, the information needed will be automatically received.”
Self-employment body IPSE welcomed the announcement: “A more flexible returns system to replace the current outdated model is something that we have long been calling for,” it said.
“Annual tax returns place a heavy burden on the self-employed, who must keep accurate records over a long period of time and then compress months of expenses into one return.”
Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants also backed the death of the traditional tax return.
“This move to the brave new world of digital tax returns will allow people to have a holistic view across the range of taxes they pay,” he said.
“As well as settling their taxes, taxpayers will be able to amend their tax codes and even pay their parking fines online”.
But he cautioned that as many self-assessors are only used to assessing via the post, they will need “access to resources” to help them ‘go digital’. If not, he fears, they’ll be “left behind.”
Indeed, there should still be the option to complete a physical return on paper and send it using the postal system, according to the Low Incomes Tax Reform Group (LITRG).
Aware of the recent ruling that HMRC broke the law by mandating online filing for VAT, the group said: “For the substantial minority who have never accessed the internet, paper must remain a valid option and not an afterthought. No-one should be forced to file online to comply with their tax obligations.”
An accountant serving freelance workers, ClearSky Contractor Accounting, sounded more supportive:
“This is a positive step, and it’s great to see a desire among policymakers to make life easier for independent professionals by moving systems belatedly into the 21st century.”
Derek Kelly doesn’t see it as a silver bullet. “Once implemented,” he said, “I
don’t think the new system will make a great deal of difference to
“These individuals are already able to file their tax returns online, well in advance of the January 31 deadline. Human nature dictates, however, that many leave it until the last minute. It’s extremely difficult to see this changing.”
A similarly assessment came from the Chartered Institute of Taxation: “[This] may not be the revolutionary simplification it is billed to be for all taxpayers,” it said.
“Those taxpayers with relatively simple tax affairs, for example employees and pensioners who pay their tax through PAYE, stand to gain most from this.
“But those with more challenging tax affairs, for example the self-employed and landlords, will still need to apply complex tax rules to calculate their income and will still then need to declare it to HMRC.”
However Mr Osborne seemed pleased with his move, which was recommended by the Office of Tax Simplification.
“We believe people should be working for themselves, not working for the taxman,” the chancellor said yesterday. “Tax really doesn’t have to be taxing, and this spells the death of the annual tax return.”
His other showpiece announcement for freelancers concerns another abolishment. No longer, said Mr Osborne, will the self-employed have to pay Class 2 NICs.
Simon McVicker, a director at freelancers’ trade body IPSE welcomed the abolishment: “The removal of Class 2 NICs will be a big boost to those working as self-employed. It represents a major simplification of the tax system which will save them around £143 year.”
Emily Coltman FCA, chief accountant at FreeAgent, agrees. She said: “ This simplification is welcome, as having two kinds of National Insurance to pay is confusing for partners and the self-employed.”
The LITRG was also supportive but not unreservedly:“Abolishing Class 2 NICs will be a welcome simplification, particularly to those for whom the requirement to register for Class 2 while also paying Class 4 has long been a source of confusion and a bureaucratic trap.
“But it is essential that nobody’s contributory benefits entitlement is eroded by the change,” it said.
The technical director of the LITRG, Robin Williamson, added: “Although few details have been announced, the self-employed will continue to pay Class 4 NIC which will subsequently be reformed to include a contributory benefit test.
“We welcome the opportunity to see more details and comment on the proposed changes in the promised consultation later this year.”
The following is also announced in Budget 2015 and impacts, or is relevant to, freelance workers:
· The government welcomes the publication of the “significant” review of employment status by the Office of Tax Simplification (OTS) and will respond to the recommendations made in the next parliament.
· The Prompt Payment Code is to be extended to cover wider poor payment practices, for example in relation to the use of supplier lists.
· Information for SMEs on accessing and using legal services is to be included on the Citizens Advice and GREAT business websites
· The government will expand eight existing enterprise zones and create two new ones (subject to business cases) in Plymouth and Blackpool.
· Support will be given for the development of young, innovative tech businesses through an £11m investment into Entrepreneur Hubs in Manchester, Leeds and Sheffield.
· The government has committed to a new ambition that ultrafast broadband of at least 100 Mbps should be available to nearly all UK premises. And as reported on FreelanceUK before the Budget, the government will take further action to support the delivery of broadband in rural areas.
· In addition, up to £600m will be provided to support the delivery of the change of use of 700MHz spectrum
· Plus, £7.4m in funding will be offered to support libraries in England to provide internet access and Wi-Fi.
Under Budget 2015, the following is announced to help the creative industries, which were hailed by Mr Osborne yesterday as “a huge contributor to the British economy.”
· The government is going to boost the rate of film tax relief to 25% for all qualifying expenditure, and extend the high-end television tax relief by reducing the minimum UK expenditure requirement from 25% to 10%, and modernising the cultural test
· A new children’s television tax relief will be introduced from April 2015, which will include children’s programmes that are game shows or competitions.
· A new orchestra tax relief from April 2016 at a rate of 25% will be introduced.
· To invest in skills and business development in the creative industries, the government will also extend the Skills Investment Fund.
· This will provide £4m to ensure that it can continue to match fund support for training and development in film, television, visual effects, video games and animation for a further two years
· The government will promote a vibrant business environment for new and growing video games companies across the UK by committing £4 million to a new Video Games Prototype Fund over the next 4 years;
media industry, local newspapers will be the subject of a consultation on
whether to introduce a business rates relief for local newspapers in England. The
consultation is necessary because local papers are “an important source of
information for local communities and a vital part of a healthy democracy.” The
government adds that it wishes to support the local press as they are having to
adapt to “new technology and changing circumstances.”
19th March 2015