Research from industry body finds 80% of freelance workers believe “government policies are harming their business”
Business confidence among contractors is down for the next twelve months, primarily driven by “convoluted” tax rules and excessive taxes, according to a survey of almost 600 freelancers carried out by IPSE (the Association of Independent Professionals and the Self-Employed).
The findings are from the body’s quarterly ‘Freelancer Confidence Index’, which tracks sentiment among contractors on several key issues, including economic and business performance.
The most significant finding is that four out of five freelancers cite government tax policy as having “a negative impact” on their business – ranked as the top factor affecting business performance this year.
Another revelation is that 54% of freelancers are now less confident about their business’s performance for the next 12 months, compared to the previous year. Just 21% of those surveyed were feeling more confident about the next 12 months.
However, freelancers were feeling more bullish about the UK’s economic outlook for the coming year, compared to the previous quarter.
Tax system has always been “the biggest barrier to growth”
Speaking about the survey results, IPSE’s Director of Policy, Andy Chamberlain, said that “record-high” inflation had stolen the headlines and become “the main story in the business world” in recent years, even though the tax landscape has presented considerable challenges.
“For millions of freelancers, who are our very smallest businesses, the biggest barrier to growth has always been the tax system”, Chamberlain said.
“This is about more than just rates of tax”, he added. “Convoluted tax rules like IR35 are crushing freelancers and the businesses they’ve worked so hard to build.
“Rachel Reeves faces her first big test as Chancellor with a Budget in October and has made no secret of the need to raise money.
“But freelancers will be hoping that the Chancellor is also open to building a fairer, simpler tax system for millions of sole proprietors going it alone”, Chamberlain added.
IPSE applying pressure ahead of Autumn Budget
The survey findings come just weeks after the Chancellor, Rachel Reeves, set out the state of public finances during a fiscal statement to parliament.
During the speech, Reeves said there was a “£22bn hole in the public finances” and highlighted that the government would have to do “urgent work” to remedy the issue, including through making spending savings at departmental levels.
Reeves also used the statement as an opportunity to confirm the date of her first Autumn Budget, which will be held on 30th October.
The former Chancellor – Jeremy Hunt – suggested his successor had used the fiscal statement to prepare the public for tax increases later in the year.
During the election campaign, the Labour Party said it would “publish a roadmap for business taxation” for the duration of parliament, to give businesses “confidence”, and committed to capping Corporation Tax at its current rate.
However, it remains to be seen whether these commitments are still feasible following the Chancellor’s statement, though – as IPSE’s survey shows – there is little receptiveness among the self-employed for further tax increases.
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