Advisers to creative freelancers reveal Spring Budget 2023 hopes and fears

A list of demands from creative industry self-employed freelancers as numerous as it is wide-ranging is likely overloading chancellor Jeremy Hunt, ahead of his Spring Budget 2023.

Appealing to Mr Hunt to on Wednesday remember his self-employed roots (he co-ran a PR firm and then a publishing biz), is freelancer body IPSE, and innovation body NESTA’s PEC.

Their wishlists to him, which contain a rise in the £1,000 trading allowance and a review of freelancer social protections respectively, are in addition to the calls of individual advisers.

'Targeted tax break'

Matt Fryer of Brookson says it would be timely for flexible workers aged over 50, potentially stung by IR35 reform, to receive a “targeted tax break” to entice them back to solo work.

Julia Kermode of IWORK wants the government to “press on” with its proposal to use a simplified 12.07% method to calculate holiday entitlement for all temporary workers.

And Seb Maley of Qdos says more should be done to “help the genuinely self-employed,” meaning a rise in tax on freelancers who incorporate, from 19% to 25%, should be axed.

'Hit the self-employed, or protect them'

“It’s a case of now or never for this government,” says Mr Maley, Qdos’s CEO, referring to the state’s chequered history with freelancers and patchy track record helping sole traders.

“The chancellor has a clear choice [on Wednesday March 15th]. Hit the self-employed with another round of dangerous tax hikes or protect independent workers.”

The Money Saving Expert Martin Lewis wants protection on energy bills, as he has urged the chancellor to keep the Energy Price Guarantee at £2,500 a year, not rise it to £3,000 from April.

'Energy bill support to help sole traders who work from home'

While that demand from the consumer finance expert is household-specific, not freelancer-specific, IPSE suggests that it’s a ‘crowd-pleaser’ move the self-employed can expect.

“We think we’ll get support with energy bills [at is has] has benefited everyone this winter, particularly those who work from home as many sole traders do,” IPSE told FreelanceUK.

More specific to the freelance economy, the chancellor should use Wednesday’s statement to increase the trading allowance to £5,000, says IPSE’s Andy Chamberlain.

'Trading allowance boost would encourage side-hustles'

Director of policy at the Association of Independent Professionals and the Self-Employed (IPSE), Mr Chamberlain said such an increase ‘would encourage side-hustles.’

“A five-fold increase in the trading allowance might even tempt the so-called ‘economically inactive’ back to work,” said Mr Chamberlain, speaking to one of Mr Hunt’s stated aims.

“[With the same non-working period of freelancers’ lives in mind] we’d also like to see the chancellor addressing saving for later life among the self-employed.

“Sole traders in particular are far less likely to be saving into a pension than employees and many have no alternative saving arrangement.”

'Reform and reboot LISA'

The association says one solution could be to “reform and reboot” the Lifetime ISA, by removing its minimum qualifying age of 40-years-old.

Poor provision for retirement by people who for work for themselves was flagged up in a report last month by Nesta’s PEC, entitled ‘Job Quality in the Creative Industries.’

“Creative workers tend to have lower paid holiday entitlement and are less likely to be offered an employer pension,” says the final report from PEC’s Good Work Review.

'Safety net for creative freelancers'

“This therefore adds to questions about the adequacy of freelancer pay, the safety net for creative freelancers, and the extent to which self-employed workers are saving sufficiently for their retirement – something for which we have very limited evidence.”

One answer could be a pilot scheme to enhance the “portability of benefits, so that entitlements are not lost when creative freelancers change jobs or employment status.”

While laudable, and part of the “comprehensive review” into the adequacy of creative freelancer social protections which the Policy & Evidence Centre (PEC) wants undertaken, status is an issue as well.

'Employment status remains a key challenge'

“Complexity in defining employment status and a lack of awareness of rights and responsibilities are seen as key challenges,” say the report authors, Heather Carey and Lesley Giles of Work Advance, and Professor Dave O’Brien of Sheffield University Management School.

The trio adds: “[These challenges get] exacerbated by the distinct structural features and ways of working in the creative industries.

“This is seen, for example, in high rates of freelance and project-based work and the dominance of small and micro enterprises, which often lack specialist HR functions.”

'Introduce Freelancer Test and Ambassador'

PEC also recommends government look at how to “empower and enable” creative workers (particularly the under-represented) to invest in their skills, as it found just one in 10 creatives had participated in job-related training in the past three months.

And the centre says ministers ought to “strengthen the voice of freelancers” by appointing an Ambassador for freelancers (and other marginalised creatives), and develop a ‘Freelancer Test’ to consider the efficacy and impact of new legislation on self-employed creatives.

If such a test had been in force, the public sector off-payroll rules of April 6th 2017 and the private sector off-payroll rules of April 6th 2021, might never have seen the light of day.

'Tiny traders bearing the brunt of hostile tax landscape'

Both frameworks are now behind three demands to the chancellor, from IR35 contract reviewer Mr Maley.

“Address the ‘double-taxation’ of IR35 under the off-payroll working rules; overhaul HMRC’s IR35 tool CEST, [and] instate an independent appeals process for contractors to challenge incorrect IR35 status assessments,” he says.

Qdos’s boss continued: “The smallest businesses hold the key to economic growth, yet it’s these enterprises that continue to bear the brunt of an increasingly hostile tax landscape.”

'Urgent need'

Even where there is no hostility, NESTA’s PEC indicates a lack of support, or a lack of research to determine if support is necessary.

The centre’s report concludes: “There is an urgent need to progress in-depth research exploring job quality for creative freelancers -- not least concerning: their earnings; unpaid work; their health and wellbeing; the extent to which they feel their voice influences decision-making; their progression opportunities; and how best to enable freelancers to invest in professional development and save for their future.”

Louise Rayner, founder of tax advisory NumberMill sounds equally conscious of freelancers’ bottom lines, amid the cost-of-living crisis continuing.

'Productivity, investment, but no tax cuts'

“Tax cuts -- we all want them,” Rayner began in a post. “But what does it mean for businesses?

“The chancellor made a speech a couple of weeks ago at Bloomberg’s European headquarters in London, where he set out his long-term vision for how the government planned to achieve growth across multiple sectors in the UK.

“Hunt detailed a long-term plan to tackle poor productivity, as well as calling for greater investment in education and technology. But tax cuts? Nope.”

'Good chunk of Hunt's wiggle room is thanks to the self-employed'

Following a more positive-than-expected set of fiscal figures, IPSE’s Mr Chamberlain says there is room -- technically -- for freelancers to get some respite from HMRC on Wednesday.

But the room is small. “The chancellor did receive higher than expected tax receipts this January -- a good chunk of which came from the self-employed,” Mr Chamberlain told FreelanceUK.

“So there is wiggle room there if the chancellor wanted to deliver tax cuts. But we are not holding our breath. The emphasis from government has been on stability and fiscal responsibility -- it’s difficult to picture a dramatic departure from that narrative at this Budget.”

'Innovators of tomorrow at risk'

Freelancing taxation expert and senior accountant Chris James hopes freelancers and the self-employed do indeed get a ‘steady as she goes’ package next week.

“I hope [we get] very little from the chancellor] in terms of things that will impact tax rates from 6th April -- we are far too close to that date for big changes.”

A director at accountancy firm Workwell, Mr James justified: “Small business has enough to do battling with VAT thresholds…and employment law, and other compliance usually designed for much bigger enterprises.”

Taking specific aim at the new rate of corporation tax due to hit freelance companies with profits over £50,000 from April 6th 2023, the senior accountant asked: “Why would a government preaching a growth agenda add a 40% increase in profit-tax to small companies that we hope will grow to be the innovators of tomorrow?”