Was the budget kind to the self-employed?
Having been battered by some recent budget statements, contractors and other self-employed workers might have had a sense of foreboding as Philip Hammond stood to deliver his budget speech to the Commons yesterday.
Rumours circulating in the run-up to budget day didn’t help matters. It was widely reported that the Chancellor could extend public-sector IR35 compliance rules to the private sector and it was rumoured that the VAT threshold could be lowered.
But can the self-employed community breathe a sigh of relief today?
In this blog post we look at some of the most important aspects of the Chancellor’s budget as they relate to contractors and the self-employed.
Private sector IR35
One of the biggest fears for contractors and other self-employed workers in the run-up to budget day was that the Chancellor would extend public sector IR35 compliance changes to the private sector.
This would have made life more difficult for thousands of contractors operating through personal service companies. It could have also resulted in many contractors losing some of their take home pay.
The Chancellor made no mention of IR35 or off-payroll working in his speech, but the budget document did include details of a consultation on private sector IR35 non-compliance, to be carried out at some point in the future.
Miles Grady, Director of Cloud Accountant said: “It looks as though the Chancellor has kicked the IR35 can down the road. As economic forecasts were downgraded, it seems like the Chancellor has recognised the need to support businesses, including the smallest businesses which have driven much of the UK’s recent growth.”
At some point next year, the government will publish “external research” into the effects of the new rules on the public sector. A consultation on private sector non-compliance would reasonably be expected to follow that, although no firm timescale has been given.
Miles Grady continued: “Our belief is that balanced ‘external research’ should show that the IR35 changes were heavy handed and harmed the public sector. But this doesn’t mean that the IR35 threat has gone away. We will continue monitoring the situation and give customers the best advice we can.”
Another proposed change that would have affected large and small businesses was the idea of lowering the VAT threshold.
Dubbed a VAT raid by the tabloid press, the change would have been a burden on many self-employed workers currently just below the £85,000 bracket. It would have also seen many contractors out of pocket.
The Chancellor did note that the VAT threshold represented a ‘cliff edge’ which deterred business growth, but he concluded that the £85,000 band was well balanced to keep small enterprises out of the VAT system. The band will be frozen for two years.
The Federation of Small Businesses said: “[This is] good news as VAT is already a big burden, with small firms spending a working week each year dealing with their VAT obligations.”
The Chancellor’s budget speech also promised more investment to help people retrain.
As part of the government’s commitment to helping people learn new skills, they will consult on extending tax relief for work-related training to the self-employed. This kind of relief is currently only available to employees.
They will also review how Apprenticeship Levy money can be spent. This money is also currently inaccessible to self-employed people.
Housing was central to the Chancellor’s Budget speech, and measures designed to solve the housing crisis should buoy the construction industry, which includes many self-employed people.
Even so, the Chancellor was criticised by some for not going further. Some politicians, for example, would like to see local councils granted more powers to improve housing provision.