Spring Budget 2020 was the first from brand-new Chancellor of the Exchequer Rishi Sunak, the first as a non-EU state in over four decades, and the first in over 18 months, making it well overdue. Unsurprisingly, the Budget speech itself was dominated by preparatory measures to minimise any economic strain resulting from a coronavirus lock-down, despite being delivered with gumption and punctuated with the rallying cry of ‘getting it done’. What wasn’t mentioned (aside from a tax-avoidance-related quip so quick you’d be forgiven for missing it), however, was the IR35 reform.
What was omitted from the speech itself has been included in the Budget document, and the government has indeed confirmed that they’re getting IR35 done. Aside from IR35, there’re a handful of other points that directly affect the self-employed that we think are worth highlighting. Read on for the best-bits of Budget 2020, contractor edition.
IR35 private sector reform to go ahead on April 6th
It’s official: the private sector IR35 reform is being rolled out as of April 6th. This shouldn’t come as a big surprise for anyone that’s familiar with the history of the off-payroll legislation, but for those that were still holding out hope for a delay, it’s certainly disappointing.
James Poyser, founder of IR35 spotlighting site offpayroll.org.uk and a key player in campaigning for a delay to the private sector reform, comments on the Budget 2020 confirmation.
"There's plenty of good news for business - more cash for R&D and big investments in transport and digital infrastructure,” Poyser says. “However, sadly, IR35 has not been delayed.”
“There's a paradox: these large investments are project based and need to be delivered by a flexible expert workforce and small consultancy firms who can roll on and off projects as needed,” he continues. “The right thing would have been to announce wider reforms to employment rights and encourage the self-employed to play their part in 'getting it done'."
The official commentary from the Budget 2020 notes sticks to the established line, and is as follows:
'The government has recently concluded a review of the reform and is making a number of changes to support its smooth and successful implementation. The government believes it is right to address the fundamental unfairness of the non-compliance with the existing rules, and the reform will, therefore, be legislated in Finance Bill 2020 and implemented on 6 April 2020, as previously announced.'
Budget 2020 confirms coronavirus financial support for self-employed
Straight out the door, the Chancellor acknowledged that coronavirus would have a ‘significant’ but ‘temporary’ impact on the economy. He warned that up to a fifth of the working population may be off sick at any one time, meaning that the UK’s productivity capacity would inevitably fall, as would consumer spending.
Sunak set out a three-prong approach that attempts to curb the worst effects of the virus on the economy and British workers, which includes giving the NHS ‘whatever extra resources’ it needs to cope with demand, and ensuring statutory sick pay is provided from the very first day of self-isolation, regardless of if any symptoms are present. However, it’s the measures that aim to help the contracting community in particular that we’ll be looking at.
As part of his £30bn plan to bolster the nation against COVID-19, Sunak won’t be extending this statuary sick pay to the self-employed. Instead, millions of contractors, freelancers, and gig-economy workers will be given help through a £500m boost to the benefits system, including a temporary halt to the minimum floor in universal credit and quicker payments for employment and support allowance (ESA) claimants.
The government will also refund smaller businesses – meaning anyone with less than 250 employees - for any sick pay for up to 14 days, and banks will offer loans of up to £1.2m to support small businesses through any fiscal headaches.
"If people fall ill or can't work, we must support their finances. We must make sure that our safety net remains strong enough to fall back on," Sunak said in his Budget 2020 speech.
Raise in National Insurance threshold, Entrepreneurs’ Relief reform, and superfast broadband also promised in Budget 2020
Other distinct points of interest for contractors in the Budget 2020 document are a raise in the National Insurance threshold, the reformation of Entrepreneurs' Relief, and the upscaling of superfast broadband as part of country-wide infrastructure improvements.
National Insurance threshold
The Chancellor has pledged to increase the National Insurance (NI) threshold in today's Budget. Sunak has increased the threshold from £8,632 to £9,500, meaning that around 31 million people will receive a tax cut worth £104 a year. However, self-employed workers who are paying a lower rate won't save as much as a result of the decision, but they will still save about £78 on their annual tax bill – better than a poke in the eye, as the saying goes.
Entrepreneurs’ Relief reform
Entrepreneurs’ Relief is to be reduced from £10m to £1m as part of a ‘sensible reform’, as announced in the Budget 2020 speech; many had expected it to be abolished entirely, so this compromise is a welcome one. The current rate, which has been in place since 2008, affords entrepreneurs a 10 per cent cut in the Capital Gains Tax they pay on the sale of their business, and costs the government an eye-watering £2.6bn a year. Some have criticised this measure as demoralising for those that have put in years of work building their business, but it’s being mostly viewed as a necessary concession.
National Chairman of the Federation of Small Business Mike Cherry says: “The sensible compromise on Entrepreneurs’ Relief is one that we have proposed, and championed, and everyday entrepreneurs will be pleased to hear the Chancellor say that he has listened to FSB on this. This has been a deliberately pro-small business first budget for the Chancellor. We hope it is the start of things to come.”
The Chancellor also announced an investment of £5bn in ‘gigabit-capable’ broadband ISP networks across the UK by the end of 2025 – an ambitious, but not unwelcome, target. In short, this means helping those in the final 20% of hardest to reach premises receive super-fast broadband, with the aim of being able to reach every UK home by the end of 2025. This is particularly good news if you're a rural home-worker.
‘The government’s existing superfast broadband programme has shifted its focus to delivering gigabit-capable broadband and has already delivered full-fibre to over 370,000 premises,’ said the Budget 2020 document. The government has also promised to extend geographic 4G mobile cover to 95% of the UK by the end of 2025 (this may help the 5G roll-out too), which forms part of a £1bn industry-led Shared Rural Network (SRN) deal that is being supported by £500m from the Government.
Don’t abandon hope, all ye who contract
Despite a backdrop of economic uncertainty and anxiety-inducing legislative reform, it's important to remember that the self-employed community has thrived in recent years.
Almost 15% of the entire UK workforce now work for themselves - almost the same amount of people working in the public sector - and those numbers are only growing. IPSE's latest study showed that the number of self-employed people in the UK is the highest it's ever been (a whopping 5 million), despite the looming changes to the off-payroll rules, an epidemic of blanket status determinations, and the will-they-won’t-they game of Brexit.
There’s also an increasing focus on carbon neutrality, a better work-life balance, and a culture of changing jobs more frequently than any previous generation, all of which lends itself perfectly to contracting. Self-employment isn’t for everyone, but it’s certainly the way the UK labour market seems to be shifting.
While many contractors, recruiters, and end clients alike are (understandably) discouraged by the Budget 2020 news, it’s still not too late to get ready for the IR35 reform. There are steps you can take, no matter where you sit on the supply chain, to make sure you’re prepared for the off-payroll changes; contract and working practices reviews are the first port of call while educating yourself about the off-payroll rules is crucial to staying on the right side of the legislation.
However, the most important thing to remember when preparing for IR35 is that collaboration is key. Maintain good communication during the whole process and encourage openness throughout the supply chain to minimise the potential for any nasty surprises.
Larsen Howie can help you prepare for IR35
Larsen Howie offers a range of contract and working practices reviews – you can find out which option would be best for you here. We also offer IR35 investigation insurance with representation from Andy Vessey should it go to tribunal, as well as training and consultation for businesses that wish to continue working with their invaluable contractor workforce.
For any further information or advice, please call us on 01163 800 400 or drop us an email. Alternatively, take a look around our Knowledge Hub for more IR35 advice, industry news, and contractor guides.