More organisations have launched criticism of the impact that recent government tax increases will have on the UK’s self-employed workforce. Experts have warned that recent 1.25 per cent increases to National Insurance contributions (NICs) and dividend tax – part of the government’s plan to fund NHS and social care – will exacerbate other issues facing the freelance sector, including the impact of IR35 and the lack of financial support many received during the COVID-19 pandemic.
Discussing the impact of tax increases on the self-employed, Employment Status Forum chair Rebecca Seeley Harris said: “The levy set out today by the Prime Minister will be made on both the employed and self-employed whose income falls above the Primary Threshold/Lower Profits Limit of £9,569. The dividend rate will be increased to 8.75 per cent and 33.75 per cent respectively. This will increase from April 2022.”
“The Treasury report states that only 40 per cent of individuals are affected by the increase because of the combination of the £2,000 tax-free allowance and the personal allowance. But this 40 per cent is made up of those who were also excluded from any meaningful help during the pandemic. They are the forgotten and now bear this burden too. Thousands are still struggling, especially those in events, hospitality and the arts.”
Seeley-Harris went on to assert that freelancers working through Umbrella Companies, including NHS staff and care workers – would suffer doubly from the tax increases, as most will pay more for both employer and employee NICs.
Meanwhile, James Poyser, offpayroll.org.uk founder and inniAccounts CEO, said that the tax increases would affect many limited company workers that had already been hit by the increase in corporation tax earlier this year, IR35 and the impact of the COVID-19 pandemic.
Poyser called the tax increases “another cynical indictment” of the sector by the government, adding that the government “are blinkered to the benefits that these companies, self-starters and entrepreneurs bring to the economy, and the value they offer companies across the UK.”
