Inflation puts income squeeze on freelancers
Record levels of inflation could hit freelancers and other microbusiness owners harder than other workers if they have higher than average travel costs.
With inflation rising faster than average earnings, freelancers are facing a large squeeze on incomes.
Inflation, as measured by the Consumer Prices Index (CPI), hit a five year high of 3.0% last month.
Prices outstripped wage growth by 0.9%, with earnings only increasing by an average of 2.1% since the start of the year.
Data from the Office for National Statistics reveals that rising fuel costs and other travel-related expenses were one of the biggest driving forces behind the inflation rise.
Self-employed interest groups argue that rising transport costs hit freelancers harder than other worker groups because they often have to travel further to complete jobs, and they cannot recoup travel expenses from their employers.
UK citizens also face higher food costs, with the weak pound pushing up the prices of many imported products.
The ONS’ Head of Inflation Mike Prestwood said: “Food prices and a range of transport costs helped to push up inflation in September. These effects were partly offset by clothing prices that rose less strongly than this time last year.”
The Association of Independent Professionals and the Self-Employed (IPSE) highlighted the risks to freelancers across the UK, warning that inflation puts particular pressure on freelancers because of their above average transport costs.
Tom Purvis, IPSE’s Economic Policy Advisor said: “This increase means freelancers and others across the UK will now feel even more of a squeeze as their earnings fall further behind the cost of living. Rising fuel costs will also be a particular blow for the many self-employed people who have to commute long distances to work. And with the cost of train tickets climbing to an even higher rate, they will be left with no choice but to take the hit from rising petrol prices.
“This new inflation high will also put more pressure on the already heated debate about interest rates. With the next decision due on 2 November, it’s looking increasingly likely they will raise interest rates in the short term.”
Cloud Accountant Director Miles Grady said: “Self-employed people often have to travel long distances to fulfil contracts so rising transport costs puts a significant squeeze on freelancer incomes.
“To minimise the impact of transport cost increases, freelancers and other self-employed workers need to make sure that they claim tax back on all of their business travel expenses. Easy-to-use platforms and apps like FreeAgent and Xero make this easier than ever. And Cloud Accountant will always be there to advise customers on what they can and can’t claim.”