What does the Spring Budget mean for the self-employed?

08th March 2024
Written by Qdos Contractor

Further cuts to National Insurance offer some relief for sole traders, but limited company contractors are all but ignored 

The Chancellor, Jeremy Hunt, has unveiled his Spring Budget – the first fiscal event in what is widely expected to be an election year. 

In a speech lasting over an hour, Hunt talked of long-term economic growth and the road to lower taxes. He spoke about small businesses being “close to my own heart”, acknowledging that “lower-taxed economies have more energy” and “more dynamism”.

So what followed? And did the Chancellor back up his claims with tax cuts and small business-friendly policy? 

Let’s take a look…

What was announced at Spring Budget 2024?

In truth, the Spring Budget offered little surprise; ahead of the event, it was widely reported that the Chancellor was considering cutting the rate of National Insurance by 2%.

The move materialised, and it does offer some self-employed workers a cash boost – estimated to be worth £350 on average for sole traders – particularly in conjunction with the cut that took effect at the start of the year.

However, as pointed out by economists, with income tax thresholds frozen, more people are being dragged into higher tax rates. It means ‘fiscal drag’, as it’s known, could impact how much of a saving these NI cuts actually amount to.

Here are the other key takeaways for freelancers, contractors and sole traders: 

  • National Insurance is to be reduced by a further 2p, effective 6th April 2024. From the new tax year, employees will pay Class 1 NICs at 8% on earnings between £1,048 to £4,189 a month, rather than 10%. This will benefit those operating via umbrella companies and via PAYE.

  • Sole traders will see more change, too. Combined with the abolition of Class 2 NICs, by reducing Class 4 NICs from 9% to 6%, the average sole trader on £28,000 will save £650 a year – according to the government.

  • The Budget document reiterated the government’s commitment to tackle tax avoidance in the umbrella sector, to ensure “fair, genuine competition in the market” and to prevent “significant Exchequer losses caused by tax non-compliance”. Next steps will be announced in due course. 

  • The VAT threshold will be increased, from £85,000 to £90,000 as early as 1st April, in a move that will benefit sole traders and those working through their own limited companies. 

  • As “lots of families and sole traders depend on their cars” for everyday business use, the Chancellor confirmed that the current cut and freeze on Fuel Duty will remain in place for another year.

Added to this…

  • The UK’s current tax regime for non-domiciled residents will change. The current system will be abolished from April 2025 and will be replaced with something “simpler” and “fairer”.

  • Finally, the Chancellor announced an increase to the salary threshold for child benefits, from £50,000 to £60,000. The benefit will taper up to earners on £80,000 before being withdrawn.

Was this a missed opportunity?

It’s difficult to see it any other way. While these measures may be welcomed by many, there is little in the way of targeted support for millions of self-employed workers. 

With a general election looming, it could seen as a glaring omission – particularly given our own research suggests that around two in three independent workers do not have faith in any of the major political parties right now. 

Having asked contractors and self-employed what they wanted the government to address this year, IR35 reform and the recent hike to Corporation Tax were the two stand-out issues – both of which were overlooked in the Spring Budget. 
Qdos Contractor
Written by
Qdos Contractor
Award-winning providers of insurance for the self-employed, Qdos are the leading authority on IR35, offering industry-leading employment status services to ensure the flexible working industry thrive. Qdos are the Best Contractor Insurance Provider 2022 and won the Queen’s Award for Enterprise in Innovation 2022 and 2017. 

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