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Hammond hammers the self-employed 'white van man'

There was just one topic dominating debate among the Shropshire business community after Chancellor Philip Hammond’s first budget – the shock rise in National Insurance payments for the self-employed.

The controversial plans for higher taxes for self-employed workers could lead to the stagnation of enterprise, it has been claimed.

That’s certainly the view from the Shropshire-based entrepreneur behind Location:Remote – the UK’s first conference dedicated to supporting freelancers and remote workers across the UK.

Matthew Revell said the announcement from the Chancellor would discourage people from taking the leap into freelance working, despite the new digital economy making it easier than ever for people to set up their own business.

In his Spring Budget, Chancellor Philip Hammond revealed National Insurance contributions will rise for the self-employed by 1 per cent to 10 per cent from April next year. That will then rise again to 11% in 2019.

The move, along with other changes, is set to net £145m for Government spending.

Matthew, managing director of software development consultancy Hoopy, is organising the UK’s first conference aimed at remote workers and distributed teams in Birmingham in July. He said: “There are now more than two million freelancers working in the UK, which is up 43 per cent since 2008.

“Of the UK population of self-employed professionals, 42 per cent of the 4.8 million demographic are freelancers making it the fastest-growing area of self-employment.

“It’s disappointing that the Government has chosen to penalise freelancers who make up such a large portion of the self-employed industry. It will, in particular, target the lower and middle income bracket of earners, and potentially deter people from choosing this way of working.

“It is a move which could lead to the stagnation of enterprise and it is a tax on entrepreneurs looking to create and develop their own business.” 

Mike Cherry, FSB National Chairman and Midlands businessman, gave his assessment on the main Budget announcements.

On the self-employed question, he said: “The genuinely self-employed are fundamentally different to employees – they are the risk takers that spearhead growth and productivity in our economy. They need help and support from Government given the spiralling costs of doing business, not additional tax burdens.

“This measure is a tax grab on middle income self-employed people, who are just about managing. Class 4 National Insurance Contributions (NICs) will apply from about £8,000 to £45,000 in profits. Millions of self-employed will now face this tax hike, including plumbers, hairdressers, designers, musicians and many others in all our local communities. 

“There are many areas where the self-employed don’t receive the same provision as employees to Government funded benefits. Self-employed people also face higher barriers to entry, for example, in relation to access to income protection or mortgages.

“We are pleased that the Government name-checked FSB before announcing a consultation on the maternity and paternity benefits available to the self-employed. The self-employed face many other inequities in the provision of benefits and in the access to other financial products and services. We will work with the Chancellor to ensure the review genuinely addresses all of these."

He added: “FSB welcomes the fact that the Chancellor has listened to the small business-led campaign on business rates. The £435 million of new money is a direct and much-needed response to those facing astronomical hikes in their business rates. This immediate relief is vital in the short-term, and action on more frequent revaluations will also help. But this tax remains out-of-date so today we call for a cross-party Commission to create a simple, fair tax system for a modern economy.

“Mr Hammond announced that he would take forward FSB’s proposals to help the self-employed in the benefits system. We look forward to working with him on what this may mean for maternity benefits and paternity leave.

“However, the National Insurance rise to 10% next year and 11% in 2019 should be seen for what it is – a £1 billion tax hike on those who set themselves up in business. This undermines the Government’s own mission for the UK to be the best place to start and grow a business, and it drives up the cost of doing business. Future growth of the UK’s 4.8 million-strong self-employed population is now at risk. Increasing this tax burden, effectively funded by a reduction in corporation tax over the same period, is the wrong way to go.”

On business rates, Mr Cherry said: “The £300 million discretionary relief fund for local authorities to target those businesses most in need is a very welcome short-term measure – but there is concern that the fund may not be big enough. Many small firms are already receiving their bills and so it is vital that Government and local councils communicate immediately with their local business population to explain how this fund will work. The formula needs to take into account those areas hardest hit in London and in regions across England.

“Businesses set to lose small business rate relief will be helped by the cap of £50 per month set on any increase. In addition, smaller, independent pubs will benefit the most from the proposed £1,000 reduction to their rates bill this year.

“FSB has called for more frequent revaluations. We’re disappointed that this now won’t happen until 2022 at the earliest. In terms of fundamental reform of an outdated system, today FSB calls for a cross-party review, such as a Royal Commission, to consider what a fair, modern business tax system would look like.”

Clare Francis, Barclays Savings and Investments Director, commented: “The surprise announcement that the dividend allowance will fall from £5,000 to £2,000 in 2018 underlines the importance of maximising the Stocks and Shares/Investment ISA allowance, as returns are tax free.

“If you haven’t taken advantage of this tax year’s ISA allowance yet there’s still time – you have until 5th April and can invest up to £15,240. Then from the 6th April, you’ll have a brand new allowance that you can make use of and the good news is that the annual ISA allowance is rising to £20,000 for the 2017/18 tax year, meaning you will be able to invest even more of your money tax efficiently.”



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