Autumn Statement: NI or income tax cuts could be a win-win for the self-employed and the economy. Plus self-employed and independent worker specialists share their views on what they’d like to see announced in the upcoming Chancellor’s speech
In a significant move that could provide much-needed relief to self-employed individuals, new tax rules have been rumoured to take effect from Wednesday, November 22, 2023, following changes to National Insurance contributions. These changes are expected to reduce the overall tax burden on self-employed individuals, offering them a much-needed boost during these challenging economic times.
Currently, self-employed individuals with profits between £12,570 and £50,270 are subject to a 9% National Insurance contribution. For profits exceeding £50,270, the contribution rate increases to 2%. However, the upcoming changes are likely to lower these contribution rates, providing self-employed individuals with a significant savings.
The exact details of the revised tax rules are still to be announced, but indications suggest that the 9% contribution rate could be reduced to 7%, while the 2% rate may be eliminated altogether. This would result in substantial savings for self-employed individuals, particularly those with higher profits.
PM Rishi Sunak and Chancellor Jeremy Hunt have sent in their Autumn Statement to the Office For Budget Responsibility (OBR) last week for inspection. The sudden change of heart on National Insurance or income tax comes after the OBR underestimated the amount of available wiggle room, which is in the region of £30 billion, enough for a cut in the headline rates of income tax or National Insurance, The Daily Mail reported.
The government’s decision to implement these tax changes stems from a recognition of the challenges faced by self-employed individuals, who often find themselves struggling with rising costs and economic uncertainty. By reducing their tax burden, the government hopes to alleviate some of this pressure and encourage self-employment to flourish.
The new tax rules are expected to be welcomed by self-employed individuals across the UK, providing them with a much-needed boost and a sense of reassurance during these difficult times. The reduced contribution rates will undoubtedly alleviate financial strain and allow self-employed individuals to reinvest in their businesses and contribute more effectively to the economy.
Experts share their Autumn Statement wish list
Minimum trading allowance should be raised
Terry Payne, Managing Director of staffing app, hubbul, called for the minimum trading allowance (currently £1000 per year) to be raised.
Payne says with the financial challenges faced this year, many people have started side hustles to boost their earning power.
“The government should reward and support these workers; increasing the trading allowance is one way to do so,” says Payne.
He continues, “This would put more money in the pockets of these workers, who are crucial to the economy and the businesses that engage them. This week’s Budget gives the Chancellor an opportunity to put measures in place that will make a difference to this under-appreciated sector of the workforce.”
Conservatives must re-think how they tax the self-employed
Seb Maley, CEO of IR35 expert, Qdos, urged the government to reverse the Corporation Tax increase and address IR35.
“The government must rethink how it taxes and treats the 4.2m people working for themselves in the UK,” says Maley. “It’s a drum many of us have been banging for years, but policymakers have buried their head in the sand.,” he says.
Maley continues, “Tax hike after tax hike, needless reforms and an increasingly aggressive HMRC mean the government is on the verge of burning all bridges with the self-employed workforce. But the fact is, time is running out for the Conservative Party. The Autumn Statement offers the chance to reduce the tax burden – whether that’s rolling back on the recent Corporation Tax hike or fixing the problems that plague the IR35 legislation.”
Regulate umbrella sector and save the livelihoods of 700,000 workers
“The umbrella sector remains unregulated, seven years since the government promised to take action,” says Julia Kermode, CEO of umbrella company compliance specialist, PayePass.
Kermode says 700,000 umbrella workers must be protected from tax avoidance schemes: “Given the billions that pour through the umbrella industry every year, the government must turn its attention to eradicating tax avoidance schemes once and for all. The Autumn Statement is a timely opportunity to stabilise the sector; without urgent action, this vitally important industry is at risk – along with the livelihoods of some 700,000 workers.”