Budget 2021: What’s in it for the self-employed?

Chancellor unveils £150bn package, but where did the self-employed feature - if at all?

The Chancellor of the Exchequer unveiled the government's fiscal plans for the year ahead in the Autumn Budget - an event that was noticeably light on information directly impacting freelancers, contractors and the self-employed. 

To a degree, this wasn’t unexpected. Following the recent announcement of the social care levy, changes to Corporation Tax set for 2023 and the introduction of IR35 reform in the private sector in April, the government has already revealed or recently rolled out a number of tax changes affecting the UK’s smallest businesses. 

Chancellor details £150bn spending plans

That’s not to say Budget 2021 wasn’t eventful. Against a backdrop of economic uncertainty, Rishi Sunak outlined the government’s vision for what he described as a “stronger economy for the British people” and a Budget to “create jobs, improve skill, tackle NHS backlogs, put more police on the streets, and build new homes, hospitals and schools.”

In his speech, the Chancellor said Government spending is set to grow by £150bn a year by 2024/25. This will mark a £90bn rise and the largest increase in overall spending for any Parliament this century. 

At a glance, here are the key takeaways from the Budget 2021:

• The UK economy is expected to return to pre-Covid levels by 2022

• Inflation is to spike at 4% next year, up from 3.1% in September 2021

• Unemployment is set to peak at 5.2% next year, lower than the 11.9% originally predicted

• Economic growth expectation was revised, up from 4% to 6.5% this year

• A 50% business rates discount for hospitality, retail and leisure sectors

• There will be a £3.8bn investment in skills and training, to get people back to work 

• The Universal Credit taper rate will be cut from 63p to 55p, which will see some claimants keep £1000 a year more

• Public sector pay will rise, but it’s not yet known if this wages will exceed the rate of inflation

• A consultation into online sales tax is to be held 

These are in addition to several announcements made recently:

• A social care levy will be introduced in April 2021, which will see dividend tax and national insurance rise by 1.25%

• A 6.6% increase in the National Living Wage, which from April 2021 will mean those aged over 23 will earn a minimum of £9.50 an hour (rising from £8.91)

Sunak focuses on HGV drivers, but ignores IR35

IR35 didn’t feature in the Chancellor’s speech - the first time in years that the build up to a Budget hasn’t been dominated by uncertainty surrounding this legislation. But given that reform was introduced in the private sector in April, that the Chancellor ignored the subject wasn’t too much of a surprise. 

The opportune moment to address the issue of IR35 reform - which has contributed to the 100,000 shortage of UK HGV drivers - was when Rishi Sunak announced a freeze on vehicle excise duty (VED) for HGVs and funding to improve lorry park facilities. 

Omission of self-employed does not go unnoticed 

In his hour-long speech, it was clear the Chancellor was keen to paint a positive picture following the economic difficulties brought on by the pandemic. Phrases like, “growth up, jobs up, and debt down: let there be no doubt - our plan is working”, were often used.

However, as many experts in the self-employed sphere have explained, it’s difficult to overlook the recent raft of tax reforms that do little to help millions of people working for themselves other than those with business premises.  

Our CEO, Seb Maley, touched on this, when speaking to Business Matters magazine:

“There are two ways to view this Budget. On one hand, it’s a relief there are no major tax changes affecting the self-employed. On the other, many will feel the damage has already been done. 

“Sparing the self-employed in this Budget speech doesn’t even paper over the cracks. These workers are bearing the brunt of short-sighted, quick-fix tax reforms that endanger this vital cog of the economy, rather than support it.”