Self-employed workers were handed a tax cut of just over £130 a year by the chancellor as he made good on his promise to simplify taxes for Britain’s 3 million self-employed. However, many thought that other budget moves — including the proposed changes to freelancers operating as limited companies — were detrimental to self-employed workers.
George Osborne announced that Class 2 national insurance payments would be abolished from April 2018 — saving most self-employed an average of £134 a year. “This will allow millions of self-employed individuals to keep more of their money and invest it back into growing their business,” he said.
However, he decided to give public sector employers the liability for whether contract workers, who operate within limited companies, should be paid as employees or freelance. Matt Searle, an IT contractor, said he wouldn’t work in the public sector any more as he believes all contractors will effectively become PAYE taxpayers. “Even if the implementation is a year or two away I wouldn’t want to take on a project now. These public sector IT projects last years and I just wouldn’t want to risk it,” he said.
The Association of Independent Professionals and the Self Employed said a contractor turning over £87,000 a year would pay £15,120 in corporation tax and £11,281 in taxes on company dividends. This would total about £2,000 less in tax than if they were an employee.
“That £2,000 has to pay for the cost of running the business, and it only goes a very small way to make up for the loss of other benefits of full-time employment which are denied to freelancers,” it said.