Is the Autumn statement government’s last chance to back the self-employed?
- 10 Nov 2022
- Fred Hicks
Two weeks ago, I wrote that despite a series of let downs, government still has a chance to win back the confidence of the self-employed. Since then, press speculation about the contents of the upcoming Autumn statement suggests that company owner-operators could be hit with even higher taxes on dividends. Ahead of the statement, IPSE has written to the Chancellor to let him know that if driving a wedge between government and small business is his aim, then hitting dividends is the way to go.
The self-employed are being hit from all sides
Soaring inflation and the cost-of-living crisis are at the forefront of everybody’s minds, but it is worth reflecting on exactly what this means for the self-employed.
It means that owners are making impossible choices between absorbing unaffordable cost increases, passing them on, or alienating faithful clients.
It means that the perennial problem of late payment will get even worse, as clients (many of whom will themselves be struggling financially) find cause to delay financial outgoings – with the freelancer’s fee too often being seen as an easy target.
And it means more owners will be pushed into debt to keep their businesses afloat, whilst those already in debt (our research suggests as many as 1 million self-employed were pushed into during the pandemic) could be tipped over the edge.
Solo business desperately need a tailored policy agenda
For the self-employed, it at least seemed that policy was moving in a certain direction towards the end of the previous decade. Establishing the post of Small Business Commissioner, rolling out the Prompt Payment Code and placing a duty on companies to report payment practices showed momentum was building behind ending late payment.
And as unwelcome as the rollout of off-payroll was for contractors, the launch of a huge Employment Status consultation showed government’s willingness to engage with the issues that underpin the rules. It could have brought much needed clarity to the IR35 rules which have impacted contractors for the past two decades.
But it feels that these issues have since fallen by the wayside. Commitments to scrap the off-payroll rules, recognised for creating “unnecessary complexity” by the then Chancellor, were undone in the blink of an eye without a specific case being made in its favour.
A consultation on handing new powers to the Small Business Commissioner is still without answer from government nearly two years on from it closing.
The Employment Status consultation, launched in 2017, returned only months ago with a decision to abandon the work and publish status guidance online instead.
And the umbrella company sector remains unregulated, despite repeated pleas by IPSE and others for this to change before the introduction of IR35 reforms, not years after.
These issues and many others can’t be meaningfully addressed in isolation – it needs government to decide if it truly supports those who work for themselves, and if so, how must policy change to fit that vision?
An Autumn statement is a good place to start
IPSE has written to the Chancellor ahead of next week’s Autumn statement, setting out a handful of measures which could go some way to winning the support of the self-employed.
With IPSE research this year finding that freelancers are owed an average of £5,320 in unpaid fees from clients, and one in five being unable to afford basic expenses as a result, we’ve called on government to meet our call for establishing a standard UK commercial payment term of 30 days. Being paid on time could be the difference between staying afloat or falling into debt for a vast number of freelancers this winter.
We’ve also highlighted the need to ensure that that solo businesses can stay viable in the long-term. Extending the existing tax-deductible status of training for existing skills, to also cover new skills, will support freelancers with ambitions to diversify and grow their businesses over the coming years.
But for company owners keeping a very close eye on their incomes today, speculation that dividend taxes could be squeezed again will be extremely worrying. IPSE has called on government to protect company owners’ dividend income from any further raids – particularly given that government has depleted the dividend allowance in recent years and retained the Health & Social Care Levy increase to dividend tax, despite the wider policy being reversed.
Ultimately, IPSE wants to see government engage in discussion with the self-employed over a new consensus on how they are taxed. Those that work for themselves do so because they love the freedom and flexibility that it brings. They love the independence - the ‘not-having-a-boss-to-report-to’. And they love the sense of achievement of growing and sustaining their business.
Instead of creating obstacles for these people through the tax system, let’s find a way to bring the shared goals of government and the self-employed into alignment. IPSE has proposed multiple ideas on how this could be accomplished, and we’ve asked the Chancellor for the opportunity to discuss these again.
Your response to the Autumn statement
We'll be watching the Autumn statement closely and, as ever, we are keen to hear our members' reaction to what's announced. We're hosting a virtual Member Meet-Up at 12.30-1.30, Friday 18 November, to discuss what it means for your business and others like it.
You can register for the Meet-Up here - we look foward to meeting with many of you then.
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Senior Policy and Communications Adviser
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