In his speech, George Osborne today promised that today’s final, pre-election Budget will “back the self-employed, the small business-owner and the homebuyer” proclaiming that Britain’s economy is once more on the rise, dubbing the nation, ‘The Comeback Country’.
Freelancers face a mix of measures following Osborne’s 59 minute speech yesterday, many of which appear to be aimed at making the life of the independent professional much easier, while some still target cracking down further on tax avoidance.
Despite Osborne’s insistence that Britain is in the midst of an economic comeback, much of the rhetoric used throughout the speech focused on further reducing the deficit and national debt, with Osborne even expressing at one point, “we choose… to use whatever additional resources we have to get the deficit and the debt falling.”
With that said, let’s take a look at some of the main measures from 2015’s Budget that are likely to affect freelancers, contractors and independent professionals over the course of the next year.
Tax avoidance clamp down
Tax avoidance schemes still remain a hot topic for the Coalition Government and Osborne has written into the 2015 Budget a pledge to crack down further on anti-avoidance measures by targeting Umbrella companies and agency payroll expenses. Osborne said:
“We will stop employment intermediaries exploiting the tax system to reduce their own costs by clamping down on the agencies and umbrella companies who abuse tax reliefs on travel and subsistence, while we protect those genuinely self-employed.”
This measure would help to contribute a £3.1bn boost to the public purse. IPSE, The Association of Independent Professionals, have released a post-Budget press release, which you can read here, that details their response to the latest announcement. The release welcomes most of the major changes, but also highlights the need for the Government to consult with senior HMRC officials when cracking down on employment intermediaries and simplifying the tax system.
One of the biggest and likely warmly welcomed changes in Osborne’s final Budget is the abolishment of the yearly self-assessment tax return, alongside class 2 national insurance contributions. Individuals will now have their tax details stored in new digital tax accounts. An ambitious announcement made to the sound of millions of freelancers rejoicing.
Jim Duffy, the CEO of Entrepreneurial Spark, reacted as follows:
“The scrapping of the self-assessment tax reform and national insurance contributions for the self-employed are helpful. More can be done to cut the red tape that remains as a barrier to start-ups but this is a good first step. Raising the VAT threshold from £81,000 to £100,000 would have been equally welcome, but that is obviously one for the future.
We will continue to call for the creation of a cabinet post for a minister for entrepreneurs. That would send a clear message that the government recognises the achievements of a new generation of start-ups which are bringing billions of pounds into the UK economy.”
Rise in personal allowance
As predicted by many, there will be a rise in personal tax allowance to £11,000 by 2016/17. There will also be a rise, above inflation, of the threshold at which people pay the higher tax. It will rise from £42,385 to £43,300 by 2017/18.
Oil and gas tax measures
The Chancellor made specific reference to the threat that the drop in oil prices poses for the millions of jobs that depend on North Sea oil production in the UK. Osborne will introduce a “generous” tax allowance that is designed to stimulate investment in the industry. The Petroleum Revenue Tax is also set to fall from 50% to 35% to support production.
Digital infrastructure improvements
Contractors are set to benefit from further investment in improving the country’s digital infrastructure. £600million will be used to clear new spectrum bands to improve mobile networks and the Government will provide funding for improved Wi-Fi networks in public libraries, along with an expansion in broadband vouchers to bring Britain to the front line of high-speed broadband.
What are your initial thoughts on 2015’s Budget? Do you feel that fair measures have been put in place for freelancers? Have you found the Coalition Government, with its Conservative majority, to truly be the party of small business?