A considerable number of the UK’s freelancers, self-employed, contractors and umbrella workers are worse off since the UK’s October 2024 budget, with a concerning drop in demand and increased financial pressures
A recent survey by IPSE, the self-employment association, found that 43% of freelancers reported a decrease in demand for their services between November 2024 and January 2025, while only 16% saw an increase. Furthermore, 21% of respondents were out of work, up from 18% the previous year.
IR35 and taxes are causing hiring hesitation
A significant factor contributing to this downturn is the ongoing impact of IR35 reforms. IPSE’s survey found that 56% of unemployed freelancers attributed their situation to the influence of these tax rules on client hiring practices. Andy Chamberlain, Policy Director at IPSE, says, the uncertainty in the UK jobs market situation is “concerning, though not surprising.”
He says the survey found that freelancers are having a harder time finding work at the moment and also highlighted the dilemma facing businesses: “Hirers are between a rock and a hard place. On the one hand, we know that companies are scaling back their hiring plans in preparation for higher employment taxes from next month. Yet on the other, harmful rules like IR35 mean they could face an intrusive tax investigation for trying to plug skills gaps with contractors.”
This uncertainty is clearly stifling the freelance market, making it harder for businesses to engage with skilled professionals and hindering economic growth.
Chamberlain says, “To get the kind of growth our economy desperately needs, we need to make it easier – not harder – for businesses to work with freelancers. Addressing the impact of damaging rules like IR35 is now more urgent than ever.”
Umbrella workers must negotiate take-home pay before April
The budget’s impact isn’t limited to traditional freelancers. Umbrella company workers are also facing financial strain due to the upcoming increase in Employer’s National Insurance Contributions (NICs). As explained by Umbrella Company UK, “As the employer of contractors and freelancers for payroll purposes, umbrella companies like Umbrella Company UK are responsible for the employment costs – the Apprenticeship Levy (0.5%) and the Employer’s National Insurance Contributions (13.8%, rising to 15% from April 2025).”
This rise in NICs translates to a direct reduction in take-home pay for umbrella workers unless their assignment rates are adjusted. For example, Umbrella Company UK provided these illustrations as examples based on a £20 per week umbrella margin, 48 working weeks in the year, no expenses reclaimed, holiday pay processed and paid each payment frequency and auto-enrolment for pensions.
- Daily Rate £120: Weekly take-home pay decreases from £428.66 to £419.43
- Daily Rate £250: Weekly take-home pay decreases from £816.82 to £801.34
- Daily Rate £500: Weekly take-home pay decreases from £1,402.16 to £1,390.82
- Daily Rate £750: Weekly take-home pay decreases from £1,953.72 to £1,931.16
Sarah O’Toole, director at Umbrella Company UK, emphasizes the importance of negotiating higher rates: “From April 2025, the rise in Employer’s National Insurance will result in the employment costs rising. Therefore, whether you are a contractor using Umbrella Company UK or any umbrella company in the UK, we strongly advise you to initiate a conversation with your recruitment agency (or end-hirer if there is no agency) to discuss whether your assignment rate will be increased to cover the 1.2% rise in Employer’s NI.”
Families are worse off
Adding to these woes, broader economic instability is also a major concern. According to the ONS, and reported by The Telegraph, British families are £2.2 trillion worse off than previously understood, following a major revision to economic estimates, mainly down to how private pensions are calculated. Even with the ONS changing the calculation the IFS has claimed those revisions may be flawed. Further adding to economic confusion. This means that overall confidence in the economy has become shaken.
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