Addressing the House of Commons in the 2021 Budget, Rishi Sunak vowed to “protect the jobs and livelihoods of British people” as the UK emerges from the COVID-19 crisis.
In his speech, the Chancellor extended the Coronavirus Job Retention Scheme (CJRS) until the end of September and made another grant available under the Self-employment Income Support Scheme (SEISS).
There are no changes to the criteria for the furlough scheme. However, around 600,000 newly self-employed people who previously failed to qualify for SEISS are now eligible, if they have filed their tax returns for 2019/20.
The fourth SEISS grant will cover the three months to April and claimants can receive 80 per cent of their average profits up to £7,500. The fifth grant will be available from May onwards, accounting for the period until September.
Sole traders whose turnover has fallen by more than 30 per cent because of the pandemic will continue to get 80 per cent of their average profits. If the drop is less than 30 per cent, they will receive a grant worth only 30 per cent of their average profits.
The latest package of support for the self-employed has been mostly welcomed by industry bodies. But even so, large groups in this sector still remain unsupported.
Derek Cribb, CEO at IPSE, said: “After almost a year, this support will be a tremendous relief to hundreds of thousands of self-employed people who could not access SEISS because they had not yet filed a full tax return. […] While this support is welcome, however, we also urge the Chancellor to look again at groups such as limited company directors, who are still excluded from SEISS.”
Joanne Harris, Technical Commercial Manager at Nixon Williams added: “There was an opportunity in this Budget to go further and consider the needs of freelancers and contractors with a limited company set-up, who have essentially been overlooked in terms of appropriate government support so far.
“The proposal on the table for a Director’s Income Support Scheme (DISS) was credible and could have helped millions more people, but the government appears to have ignored this completely.”
In his Budget statement, Sunak said that although the unemployment outlook looks more positive than initially forecast, the economic harm caused by Coronavirus has been “acute” and warned that it will take a “long time to recover.”
The Chancellor outlined a three-part plan, which included supporting businesses as they reopen, fixing public finances and building the future economy.
As part of this strategy, Corporation Tax will increase from 19 per cent to 25 per cent in 2023 for businesses with profits of £250,000 or more. Firms with profits of £50,000 or less will continue to pay 19%, with those declaring profits in-between £50,000 and £250,000 to pay a tapered amount. The Treasury estimates this reform alone would raise nearly £17 billion a year in taxes.
While Income Tax and National Insurance Contributions were not raised, the Chancellor did freeze the Income Tax threshold. The move is expected to bring in £8 billion a year for the Treasury. According to the Office of Budget Responsibility (OBR), freezing the threshold will see 1.3 million more people pay Income Tax and a million more pay the higher rate.
Responding to the Budget, Seb Maley, Qdos CEO said: “On the face of it, the headline-grabbing measures in this Budget seem generous – no immediate increase in Corporation Tax, a freeze on personal tax thresholds and more support for the self-employed will please many people working for themselves, in the short term at least.
“Dig deeper though and the cracks in this Budget become clear.”
Maley highlighted that contractors are key to the UK’s economic recovery yet there was no mention of delaying or even “scrapping” IR35 reform, which will come into effect on 6th April. This could have a devastating impact on contractors, particularly those who have received no support for an entire year.
IT contractor Philip Ross echoed Maley concerns, explaining that although any help would have been welcomed, the Chancellor has a “tinted view of the self-employed.”
He said: “The message we get is you pay your taxes, but don’t expect any Coronavirus support; you pay your taxes, but are not allowed to compete as a business; and if you pay your taxes like an employee, don’t expect any employee rights.
“Businesses become successful through innovation and the use of specialist skills and resources that contractors provide. Freelancers allow for the fast flow of skills and resources from one company to another, which contributes billions of pounds to our economy – but policies like IR35 reform will create a stagnation of skills, which will do nothing for productivity and innovation.”