Autumn Statement: What the self-employed need from the Chancellor
Autumn Statement presents the perfect opportunity for the new Chancellor to show how serious he is about supporting the UK’s 4.8 million self-employed people.
As the number of self-employed people grow, so does their importance to the UK economy. In this post-referendum era, their flexibility will be essential to our future prosperity.
This year’s Autumn Statement is an ideal opportunity for Mr Hammond to reset UK economic policy and to signal his support for the UK’s smallest businesses.
The Deane Review
It’s time for the Chancellor to act on the recommendations of the Deane Review, which despite the Government commissioning, has been left dormant since its release in February. The Review had ten recommendations to Government on how to best support the ever growing and important self-employed workforce.
Two recommendations from the Review in particular can be addressed in the Statement. Fair maternity pay and access to a flexible pension scheme for the self-employed.
A tailored pension scheme
Being able to put aside savings can be difficult, as self-employed people can experience fluctuations in their income. IPSE research has found four in ten (40%) self-employed people do not have a pension, while almost two in ten (17%) have no retirement savings at all. A route suggested by the Government is to save through the Lifetime ISAs – announced at the Budget earlier this year. However the current proposal only allows savings of up to £4,000 a year, and is only available to those below 40. This isn’t particularly helpful for those outside this slim bracket.
IPSE recommends that NEST, the government’s pension provider, creates a flexible pension solution for the self-employed, allowing them to withdraw the last two years of contributions without penalty. This would go some way in reducing the perceived risks attributed to self-employment and saving.
Fair maternity pay
The self-employed are only entitled to Maternity Allowance rather than Statutory Maternity Pay. It is vital the Government brings these in line if they truly want to make Britain a country that works for everyone.
IPSE urges the Chancellor to enable mothers who are self-employed to claim a form of Statutory Maternity Pay. The Government must give equal treatment and recognition to self-employed parents so they receive the same support as employees.
Big changes take time
The Government’s Making Tax Digital agenda is the biggest change to the way tax is calculated and reported for a generation. It will affect every business and every individual in the UK – including independent professionals and the self-employed.
Our main concern is the pace at which the Government wants to implement these changes. For the self-employed, they want to bring this in from April 2018. This is too soon. However we would welcome the Chancellor deciding to bring this in on a voluntary basis at first. This will give the Government time to identify glitches and get feedback from taxpayers before it is mandated.
Perhaps the easiest way is to stagger onboarding, and thus not swamp the system, would be to begin at the VAT registration threshold of £83,000. These businesses already have to make quarterly VAT returns so the shift to quarterly reporting may be less onerous. Over the following five years, the threshold could be lowered to gradually encompass more and more businesses.
However, businesses with a turnover of less than £30,000 should be exempted as the administrative and software requirements of Making Tax Digital will be disproportionately burdensome for these very small enterprises.
Improve broadband access
The self-employed are dependent on being able to stay connected at home or while travelling. A poor internet connection hampers their ability to work.
Yet we know that many independent professionals, especially those working in rural areas, still don’t have access to an adequate broadband connection. According to Ofcom’s latest annual report on infrastructure, published in December 2015, 31 per cent of microbusinesses in the UK still lack access to superfast broadband. It’s just not good enough.
The Chancellor should ensure that within the Digital Economy Bill, the proposed Universal Service Obligation of 10mbps is truly universal, and doesn’t exclude the tricky to reach rural areas around the UK – and for this to be delivered quickly too. Fibre-optic broadband must also be a requirement for all new housebuilding projects. Improving broadband access will make remote working possible everywhere, tackling the regional disparities.
Abandon a disastrous proposal
The Government is trying to change the way IR35 works for contractors in the public sector. IR35 is a very complex and ill-conceived rule which attempts to tackle “false self-employment”.
Business groups and even HMRC seem to be united in believing this proposal to be dangerous. The plan is to make public sector organisations or the agency determine the IR35 status of engagements and then, if deemed within IR35, apply taxes as they would for employees.
Our research has shown that this proposal will force the majority of contractors out of the public sector, create huge problems around employment rights and prevent the delivery of vital public services. These knowledge workers or “personal service companies” contribute £3.5 billion to the economy every year, and that’s just those working in the public sector. It’s completely unfair that the Government will tax contractors like employees without allowing them the employee rights.
It’s essential that the Chancellor abandons this proposal.
In a few years’ time we will be talking about a population of self-employed people larger than our public sector workforce. Put simply, if the UK is to maintain its flexible workforce and competitive edge, it’s vital they’re granted the necessary support to thrive.Policy