Autumn Budget 2018 likely to leave most freelancers cold
The self-employed will have to look beyond their freelance way of working if they are to find much tangible help in Budget 2018, delivered by Philip Hammond yesterday.
So a £200m boost to rural broadband or a new IP valuation service might benefit such sole traders, as could an £8.5m investment in Coventry to prepare it being City of Culture in 2021.
But if these shots in the arm for the ‘creative industries’ do not help (just two mentions by the chancellor in his Red Book), they will have to see if the four mentions of the ‘self-employed’ do.
The first mention of them is at Budget 3.6, where Mr Hammond commits to maintaining the scope of tax relief currently available to the self-employed for work-related training costs.
'Develop self-employed's skills'
Such costs were subject to a government consultation, but the chancellor says the responses suggest that tax relief is unlikely to break down barriers to learning, or incentivise training.
“Instead,” he says, “[we are] launching the National Retraining Scheme and skills pilots to help those in work, including the self-employed, develop the skills they need to thrive.”
So £20m will go on skills pilots in Greater Manchester, including £10m specifically to aid with training for the self-employed -- the Budget’s second mention of such sole traders.
'Here to stay'
The third mention concerns self-employed people on the divisive Universal Credit scheme which, according to the chancellor yesterday, is “here to stay.”
But following this clarification by Mr Hammond (it seemed necessary to silence increasing calls to axe UC), the Treasury said the 12-month grace period would be extended to all “gainfully self-employed people.”
This will help in “giving claimants time to grow their business to a sustainable level,” officials assured, writing at Budget chapter 5.35.
Self-employed people’s fourth and final mention by the chancellor yesterday came in regard to pensions, but it was made only to schedule the publication of a document in the winter.
Specifically, the pensions department will outline its approach to increasing pension participation and “savings persistency” among the self-employed, says Budget 5.63.
But worryingly, a more direct hit on the finances of the self-employed implied in yesterday’s Red Book was flagged up not by Mr Hammond, but by a chartered accountancy firm last night.
'Easy target to hit'
In fact, at least some of the chancellor’s giveaway on income tax (both the personal tax-free allowance and the higher rate threshold are to rise) is achieved by taking away from the self-employed, said Moore Stephens.
“[The pre-Budget decision] to not scrap Class 2 National Insurance Contributions during this parliament [looks like] saving the Treasury £1.6bn over five years,” says the firm’s Mike Cooper.
“With the Treasury having to find the corresponding £9.6bn to fund the rise in the income tax personal allowances and thresholds, it seems that the self-employed have been an easy target to hit”.
'Very hard indeed'
Moreover, as Budget 2018 also announces that private sector IR35 reform will go ahead – albeit not until 2020 and only for limited company freelancers with large and mid-sized clients, Mr Hammond has, overall, hit incorporated business soloists “very hard indeed”, the accountant said.
The chancellor’s all-clear to reform IR35 in the private sector (using the public sector April 2017 rules as a model) means freelancers operating via a company will lose their right to decide their own IR35 status, where the company they supply is not a ‘small business.’
'Looking over your shoulder'
Chris Bryce, chief executive of freelance trade group IPSE, strongly condemned Mr Hammond’s forging ahead with IR35 reform, partly because of its feared impact on start-ups.
“If you’re thinking about striking out on your own, as a white van man or a one-woman band, you’ll always be looking over your shoulder, wondering when the government will be coming after you,” he said. “These measures are…so profoundly anti-business and anti-competitive.”
A former freelancer himself, Mr Bryce added: “The off-payroll rules are so complex and crude that genuinely self-employed people will be swept up…and in many cases [in the private sector], taxed out of operation.
"This will have a chilling effect on entrepreneurialism in the UK. The chancellor’s smash-and-grab approach to taxing the smallest businesses is short-termism on steroids.”
The one tiny consolation, he hinted, is that the government is not only increasing the personal allowance (rising to £12,500 from April 2019), but it is also leaving the VAT threshold alone.
Another body backing tiny traders, the FSB, agrees the ‘hands-off’ approach to the £85,000 registration ceiling is best.
“The chancellor was correct to resist any moves to lower the threshold at which point businesses begin to pay VAT, which would have extended a significant administrative burden to many more small firms right across the UK,” it said.
Jon Stride, of tax charity the ATT also endorsed the decision: “We welcome the announcement that any change to the VAT threshold has been delayed for two years, especially with the stress many businesses face already because of ongoing uncertainty on Brexit and having to manage the transition to Making Tax Digital for VAT from April 2019.”
But the ‘hands-off’ approach yesterday to the latter HMRC initiative – ‘MTD’ for short – was not in the interests of tiny traders like self-employed freelancers, according to the British Chamber of Commerce (BCC).
“We are disappointed that no action was taken to alleviate the impending administrative and cost burden associated with the implementation of Making Tax Digital, despite low business awareness of this change and the deadline coinciding with the UK’s departure from the EU,” said the chamber’s Suren Thiru.
Further hints at disappointment were dropped towards even the Budget’s seemingly positive announcements for atypical workers, such as the rural broadband funding pilot.
“In today’s world, access to a reliable connection is a basic requirement for most firms, whether they are based in cities or rural areas, “ said the BCC’s Hannah Essex.
“For the UK to prosper as a modern and dynamic economy, we need to see major progress in the delivery of digital infrastructure in every part of the country, and the question now is will the funds be enough and targeted in the right places.”
More of a shoo-in, it seems, when it comes to helping people who work for themselves is the chancellor’s decision to use Budget 2018 to extend the New Enterprise Allowance from April 2019 onwards.
Mr Bryce, at IPSE, explained: “The NEA has the potential to be a great springboard into the world of work and has already helped over one hundred thousand people onto the path of viable work, from the white van man to the one-woman band.
“IPSE is glad the NEA has been extended. Encouraging people into self-employment and to run their own businesses is an overwhelmingly positive thing for the economy, as it lowers unemployment and boosts productivity and government coffers in the long term.”
Existing freelancers unaffected by the extension, and struggling to find another Budget announcement that benefits them, might have to settle for Mr Hammond’s offerings at the off-licence.
“The chancellor’s announcement that duty on beer, spirits and cider is to be frozen will be well-received by publicans and drinkers, particularly as these taxes were expected to be increased in line with inflation,” said Andy Fyffe of tax giant EY.
30th October 2018