parliament in spring

Uneven Spring Budget sees further NI cuts, but no movement on IR35 

Chancellor announces limited package of measures to support self-employed

The Chancellor, Jeremy Hunt, announced further cuts to National Insurance as part of his Spring Budget on Wednesday 6th March.

It was widely reported in the days leading up to the Spring Budget that the Chancellor planned to cut National Insurance by 2%, and so the move – which will primarily benefit sole traders and umbrella company workers – came as little surprise.

Dubbed “a budget for long-term growth”, this statement was otherwise light on tax cuts affecting contractors. 


What measures were announced?

The reduction in National Insurance was the main takeaway. Labelling the combination of National Insurance and income tax as a “double taxation of work”, the Chancellor set out his planned changes to NICs.

From 6th April, Class 1 NICs will be cut from 10% to 8%. Class 1 NICs are paid by employees, including umbrella company workers. Class 4 NICs are paid by sole traders and will be cut to 6% from the beginning of the new tax year. 

In addition, the Chancellor announced other measures, including:

  • Effective 1st April 2024, the VAT registration threshold will increase from £85,000 to £90,000. In his speech, the Chancellor said that the move would “bring tens of thousands of businesses out of paying VAT altogether and encourage many more to invest and grow”.
  • Recognising that “lots of families and sole traders depend on their cars”, the Chancellor announced an extension to the existing cut and freeze on Fuel Duty.
  • The government also used the Spring Budget to confirm that it is “committed to protecting workers employed by umbrella companies” as part of its continued work to combat “tax non-compliance” in the sector

‘Encouraging’, but Budget ‘failed to address substantive issues’

Reacting to the statement, Andy Chamberlain – Directory of Policy at IPSE – said that the measures announced were “an encouraging sign that the Chancellor is beginning to listen to the self-employed”.

However, despite “the welcome cut to National Insurance and the raising of the VAT threshold”, Chamberlain said that “the measures failed to address the substantive issues holding the self-employed back”. These challenges include IR35 and “the looming cost of Making Tax Digital”.

“The self-employed make an enormous contribution to our economy and society”, Chamberlain said. “But it could be even greater if the government were to grasp the nettle of IR35 and address the forthcoming impact of Making Tax Digital for Self Assessment”.

Speaking about the “modest” raise to the VAT registration threshold, Chamberlain suggested that the move should “alleviate a barrier to the growth of our smallest businesses”. He called its inclusion in the budget “encouraging”. 

Recognising some of the positive elements of the Budget, Chamberlain said that “the cut to National Insurance will be welcomed” by the self-employed. But he also pointed out that “any benefit may well be undermined by frozen thresholds and continued inflation”.

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