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New freelancers, SEISS extension, corporation tax and more: What does the Budget mean for the self-employed?
- 03 Mar 2021
Budgets are always heavy-scrutiny, high-pressure events, but, with much of the country on ice, a pandemic still raging and a historic recession looming, it's fair to say there was even more anticipation than usual around the Chancellor’s Spring Budget this year.
One group watching the Budget particularly closely is the self-employed. With freelancers having been hit disproportionately hard by the financial consequences of the pandemic, support for this group – the Self-Employment Income Support Scheme (SEISS) – has been the object of much scrutiny – and anger.
Up for debate in this Budget: would the terms of the scheme remain the same? Or would the government get more support to some of the struggling excluded self-employed – like limited company directors and the newly self-employed?
There were also many rumours and questions swirling about how long SEISS would remain in place for those who have been able to access it: would the coming fourth grant be the last? Or would the Chancellor extend this vital lifeline
Another big issue hanging over this Budget was self-employed taxes: not just the rumours circulating about possible NICs and Corporation Tax rises – but also the hugely damaging changes to IR35 self-employed taxation due in April.
So, how did he do?
SEISS terms: will the self-employed get any more help?
Short answer: yes – some will. The Chancellor announced that people who were newly self-employed in 2019/2020 will be able to receive the fourth SEISS grant. This is a big step in the right direction: this group had previously been excluded because government was concerned that without a full annual tax return, there would be too great a risk of fraud. Now, however, for people who filed a return before 2nd March, this is no longer a worry. This was one of our key asks in our Budget submission, and it is very good news government took this up.
It is troubling, however, that the government still have not taken up any of the various proposals presented to them to get support to sole directors of limited companies – a group of, by our estimate, approximately 700,000. We are continuing to push hard on this.
SEISS timeline: when will support end?
Some more good news in the Budget was that the Chancellor heeded our call for self-employed support to match employee support at every turn. Therefore, now the furlough scheme is running until September, so is SEISS. The fourth grant will cover February to April, continuing at 80% of earnings or three months’ trading profits – capped at £7,500.
The fifth grant will cover May to September and the amount will be determined by a “turnover test”. People whose turnover has fallen by 30% or over will keep getting a grant of 80%, capped at £7,500. People whose turnover has fallen by less than 30%, however, will get a 30% grant capped at £2,850 – reducing as the furlough scheme does.
The latest news on IR35
The bad news with this Budget was that there was no further news on IR35, meaning that despite our calls in our Budget submission and to select committees throughout last year, the government is planning to go ahead with the changes to the legislation in April.
This is a blow – particularly for self-employed people working through limited companies. However, we are still pushing on this – and at the same time, rolling out new guidance and benefits to support members through these changes. Check the IPSE site over the next few weeks for more details.
Corporation tax
The Chancellor ended his Budget speech on a more sombre tone, pointing to the level of debt mounting on the government and the need to balance this. One of the key relevant points here is that Sunak committed to raise Corporation Tax to 25%, which will affect the many freelancers who work through limited companies (who also, as we have pointed out in the media, have not had support). There are two bits of good news here, however: first, the increase will not come into effect until 2023.
Second, the government actually did as we asked by introducing a new Small Profits rate of Corporation Tax. This means that contractors making less than £50,000 from their business will not be affected by the rise – and, between £50,000 and £250,000 there will be a taper, so it will be a much smaller increase for the majority of freelancers. Even so, however, we are concerned the £50,000 threshold is set too low, and that too many contractors who have taken a serious hit because of the pandemic – and not had the support they needed from government – will be affected. We will be campaigning for government to raise this threshold to protect the UK’s hard-working contractors.
The Budget has some good news for the self-employed
Overall, in a dark year for self-employment, there are definitely glimmers of hope and positivity in this Budget. While there are areas it addresses effectively, however, we know there are still many struggling freelancers out there who have not benefited from this Budget: and you can rest assured we will be working hard to plug the remaining gaps in support, and campaigning for a fairer, simpler, more transparent tax system that would remove IR35 and allow freelancing to flourish
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