My thoughts on the 2023 Spring Budget? The words ‘damp squib’ come to mind. It wasn’t of interest to the vast majority of temporary workers, and I was disappointed not to hear any mention of regulations that impact the freelancer and contractor industry.
In this blog, I’ll detail the few things that do affect the self-employed, and dive deeper into what we would have liked to see from this year’s Budget.
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Pensions announcements
The cap that limited how much people could amass in their pension savings before having to pay additional tax has been eradicated. Whilst this is a good thing, it’s worth noting that the cap was set at £1.07m. To have that amount in your pension over your lifetime isn’t the standard for a temporary worker, or many workers at all for that matter! We welcome the change, but it’s not hugely impactful to our industry. Having said that, the increase of the Money Purchase Annual Allowance from £4,000 to £10,000 may well help some workers who had to access their pension savings during Covid but now want to contribute more.
Likewise, the tax-free yearly allowance for people’s pensions has increased from £40,000 to £60,000 following a nine-year freeze. Most don’t have the funds to take advantage of this, but there will be some highly paid NHS or IT consultants who will and this may encourage them to continue working rather than retire.
The fact that Labour have already said they’d unwind these changes says much about who they feel will benefit most.
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Tax avoidance schemes
One announcement that does affect our industry is the potential prosecution of those promoting tax avoidance schemes. There will be a consultation on this, and it’ll be interesting to see what comes of the matter. Personally, I’d like to see HMRC and the police have greater activity in this area, as compliance is so key in the industry and until now it’s mostly the victims of scams who have been pursued for unpaid tax rather than the schemesters.
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Employment law
I was really disappointed that there was nothing on employment law in the Spring Budget. After the SEB was put on hold we were hoping the government might U-turn – but this didn’t come to fruition, and neither SEB or umbrella regulations were mentioned. Arguably, these aren’t matters for the Budget, so it’s likely we’ll see announcements from the Department of Trade in the near future. I certainly hope so, and FCSA will continue to work with government in this area to ensure regulation is meaningful and proportionate.
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Economic growth
There was some tinkering around the edges with R&D tax credits and investment zones, but the increase in Corporation Tax rates will still go ahead. This will impact business’ tax burdens and, coupled with the previously announced increase in Dividend Tax, discourage inward investment.
Although not budget measures per se, the Chancellor did reveal that the UK should avoid recession this year, with the economy reducing by 0.2%. There are predictions for growth of 1.8% in 2024, 2.5% in 2025, and 2.1% in 2026. And inflation is finally expected to fall, potentially reaching 2.9% by the end of 2023.
Whilst it will be great to see the economy recover, there were few measures that would specifically stimulate business growth, a missed opportunity.
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What we’d like to see
As well as announcements related to employment law, I’d like to see index-linked personal allowance thresholds, which would prevent people from being forced into higher tax brackets simply due to inflation. Simply by doing nothing with the tax thresholds the Chancellor raises far more from income tax – it’s a good trick from the government’s point of view but not so good for workers.
Similarly, the overwhelmingly unfair tapering of the personal allowance for those with incomes above £100,000 should be scrapped altogether – it’s one of those measures which sounds great politically but relies on people ignoring how percentages work!
It would be good to get more support for the self-employed too. From a reduction in their tax burden, to a simplified tax system, and better access to finance and training. We’re hoping for improved regulation in the future, and we’ll continue to work with the government to support the freelancer and contractor industry.
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