30th October 2024
Written by Qdos Contractor
From new opportunities for contractors to renewed focus on umbrella company compliance, we explore the key takeaways…
At the Autumn Budget, the Chancellor, Rachel Reeves, delivered what many were expecting – an increase to employers’ national insurance – alongside a host of other measures designed to raise revenues.
Having laid the foundations for tax increases when revealing a £22bn black hole in the public finances, you’d be forgiven for feeling pessimistic before tuning in. And, while the heavily rumoured employers’ national insurance hike was confirmed, increasing from 13.8% to 15%, it’s not all doom and gloom.
In fact, the measure could even instil greater confidence in the contracting sector. While increasing the costs of hiring employees, the budget may prove to be a catalyst for freelancer and contractor opportunities, who can be engaged off-payroll.
The Chancellor also revealed that the government plans to clamp down on tax avoidance in the umbrella market. A serious concern for many across the industry since the Loan Charge and roll-out of the off-payroll working rules, these plans are designed to put a stop to non-compliance and tax avoidance in the sector once and for all.
Below, we look at the headline measures impacting flexible workers with our CEO, Seb Maley, sharing his thoughts, too.
What happened at the Autumn Budget?
First things first – let’s look at those two big announcements in more detail…
- Increase to employers’ national insurance
This will rise from 13.8% to 15% from April 2025 and see the cost of hiring employees increase – a move that could motivate businesses to increase their use of self-employed workers, whether contractors or sole traders. Where IR35 and the off-payroll rules are concerned, it may also encourage businesses to rethink and reverse contractor bans.
- Tackling tax avoidance in the umbrella market
More good news, on the face of it – especially in light of ongoing concerns around tax avoidance in the umbrella industry. In her speech, Rachel Reeves promised to prevent non-compliant umbrella companies, putting this sector firmly in the spotlight.
And as it transpires, from 2026, the wider supply chain will play a big role in helping the government police compliance. How? Recruiters and end-clients are to become responsible for ensuring correct PAYE deductions have been made by the umbrella companies.
Alongside this, the Chancellor also confirmed the following:
- Income tax: thresholds will be unfrozen from April 2028 and will be “updated in line with inflation”. In theory, this will reduce the impact of fiscal drag on earnings – often described as a ‘stealth tax’.
- Corporation Tax: will remain capped at 25% for the duration of this Parliament.
- Business Asset Disposal Relief: will increase from 10% to 14%, effective from April 2025. It will rise again to 18% from April 2026.
- HMRC staff: announced recently and confirmed in the budget, HMRC will hire 5,000 additional compliance officers as the government looks to tackle the tax gap.
- Capital Gains Tax (CGT): the basic rate for CGT has risen from 10-18%, with the higher rate increasing from 20-24%.
The view of our CEO
Our CEO Seb Maley believes the changes to employers’ national insurance, in particular, could be good news for limited company contractors.
“The cost of employing people will increase, which could lead to a surge in demand for freelancers and contractors engaged off-payroll”, Seb said.
“Given how many businesses shifted contract workers on the payroll in response to IR35 reform, an employers’ NI hike may prove to be the push they needed to rethink this stance. It could become a catalyst for contract opportunities”, he added.
