It’s becoming harder and harder to be self-employed

By Fred Hicks, Senior Policy and Communications Adviser

That’s the conclusion very many of the UK’s 4.2 million self-employed are likely to be reaching, after yesterday’s Autumn statement delivered nothing to address the specific challenges they face and heaped yet more pressure on limited company directors.

It would be wrong to lay the blame for this entirely at the feet of yesterday’s Budget; the pressure on the self-employed has gradually increased over the course of years, with off-payroll rules, tax rises, and inadequate Covid support serving as particularly damaging flashpoints for the sector. Unfortunately, the Chancellor nonetheless chose to continue down the path of making it ever more difficult to work for oneself.

The broadest shoulders?

The need to raise revenue to fund vital public services is clear, and everyone will in some way pay more tax because of yesterday’s Budget.

But there is a growing sense that government routinely knocks on the doors of our very smallest businesses first. The trouble is that there are far fewer self-employed – around 1 million fewer than before the pandemic – from which to do this, making the cacophony of financial threats they face even more concerning.

Sole company directors been dealt numerous heavy blows in recent years, from being inadequately supported during the pandemic, to deeply damaging IR35 reforms – and more recently, raids on dividend income from their own companies.

It’s also becoming incredibly tough for those out on the road, especially the most quintessential cohort of the self-employed – van owners. RAC figures currently have the price of diesel at c.190p, an eye-watering 46% increase to the price payable in November 2019 of c.130p. But government has refused to lift the mileage allowance to reflect this prolonged inflationary increase.

And the VAT registration requirement for turnovers over £85,000 will now be held in place until at least 2026, meaning that many more of the smallest self-employed enterprises will be pushed over the threshold given current rates of inflation.

In short, the self-employed are being hit from all sides – but without a government that supports them, they could be marooned in this perfect storm of rising costs and intense commercial pressures for longer.

The self-employed can’t even get a namecheck

Despite some sections of the self-employed sector losing out in yesterday’s Budget, the Chancellor failed to directly acknowledge the specific challenges they face – or even mention the sector at all.

This speaks to a broader problem of policymaking not adequately catering to the self-employed. They can often be bundled in with businesses of a different magnitude under the banner of ‘SMEs’, despite three quarters of this group’s population employing nobody other than the owner. They can be seen as too varied and difficult to define, too flexible in the way that they operate to develop coherent and supportive policies.

Yet it this exact flexibility that makes the self-employed such a valuable resource for businesses and the wider economy. Clients value the depth of expertise, specialisation, and efficiency they can deliver, whilst freelancers themselves value the chance to focus on their trade without having a boss to report to; to be truly independent in their work and to take personal fulfilment in building their own business.

Arrangements like this add more than £300bn to the UK economy – but this contribution cannot be taken for granted. For all that has been done to make working for oneself increasingly difficult, the self-employed need something in return to ensure the viability of the sector in future; whether that’s clamping down on clients who refuse to pay on time or delivering meaningful support to save adequately for later life.

But the overarching priority must be to create a clear space for the self-employed in the UK’s tax and employment frameworks, helping to bring stability, predictability and – most importantly – consensus, over the fairest way to tax the self-employed.