We know that our freelancers have been hit recently by the rising costs of living and many will have kept a close eye on Chancellor Rishi Sunak’s Spring statement “mini budget” to see if he was going to deliver any help and support. If you missed it, here are the headlines so you can see what key changes have been announced, and how they will affect freelancers.
Sunak acknowledged the sombre context into which his Statement was being delivered, stating “we stand with Ukraine” and paying tribute to those soldiers fighting to defend against Russian invasion. He recognised people’s worries about the rises in the cost of living, blaming COVID, supply chain issues and the uncertainty around the situation in Ukraine for these rises – but wasn’t able to offer very much reassurance that the pressure on business and household budgets wasn’t going to get worse.
Inflation is predicted to reach a high of 8.7% this year
Inflation refers to the way we measure and predict the relative increases in prices in an economy. The higher inflation, the higher and quicker prices are rising. The Office for Budget Responsibility (OBR) found that inflation was 6.2% in February – the fastest increase in 30 years. Inflation is likely to average 7.4% for the rest of the year, with a peak of 8.7% in the final quarter of 2022. This means that the costs of things like food, energy and other goods are predicted to continue to increase, something that will affect all freelancers. The OBR had also predicted back in October that the economy would grow by 6% in 2022, but revised this figure back down to 3.8% in Sunak’s statement today.
Measures to cut costs:
What many freelancers will have been interested to hear in this budget was what the Government’s plans are for cutting those rising costs, and there were a few measures announced today that sought to address this:
- Fuel duty will be cut by 5p per litre until next March – effective from 6pm yesterday: This will help freelancers who do a lot of driving, especially if you travel long distances to visit clients and/or have a big car. It’s a tax cut worth over £5billion overall.
- 0% VAT on energy-saving materials for the next 5 years: While not directly tackling the issue of rising energy bills, Sunak promised to help homeowners improve the energy efficiency of their properties by getting rid of VAT on materials like solar panels and heat pumps.
- Targeted support for vulnerable households: Local authorities will be given another £500m for the Household Support Fund. This money is given to councils to distribute to those who need it most in their areas, and is designed to cover costs like food, energy, essentials and housing. If your household is severely struggling to deal with rising costs, you may be able to approach your local council for support from this fund.
Changes to tax
There were no specific mentions in the statement of measures to support freelancers or the self-employed. In particular, bodies that support freelancers and the self-employed, like IPSE, had been pushing for a delay to the planned increases in National Insurance announced last September. There were, however, a few changes to tax that are likely to have a mixed impact on the pockets of freelance workers:
- Although the National Insurance rise will begin from April as planned, the Chancellor did raise the income threshold at which people start paying National Insurance to £12,570 in July. This brings it into line with the income tax threshold, and could save you £330 a year on your Class 4 National Insurance bill.
- The Chancellor also promised to reduce income tax from 20p to 19p – but not until 2024, which will seem like a long way off for a lot of freelancers.
- If your freelance business has employees, you’ll also benefit from an increase in Employment Allowance from £4,000 to £5,000 from April, reducing the National Insurance bill of small businesses.
- There was no mention of IR35 – off-payroll working rules that apply to anyone freelancing through their own limited company – but this was not surprising considering IR35 is now bedded in.
Sunak also highlighted in his statement that the unemployment rate is predicted to lower every year. He pointed out that the Government is forecast to spend £83 billion on debt interest over the next financial year, and said that this requires caution in terms of public spending.
What does this mean for freelancers?
Overall there wasn’t a lot in this budget to address many of the concerns that freelancers have been expressing about the rising costs of living. The National Insurance threshold increase is probably the best news in this budget in terms of getting money back into the pockets of lower-income freelancers. Even with the planned rate increase, freelancers earning under £35,000 should pay less National Insurance to HMRC when this is combined with the new threshold. Many will welcome the fuel duty cut as trips to the petrol pumps have been getting more and more eye-watering of late!
It’s clear though that all freelancers are going to need to keep a tight eye on budgets and expenses over the coming months – and every penny helps. Dinghy freelancer insurance can help keep your costs down with our flexible pricing: all our policies are paid on a monthly basis with no additional admin or interest charges, and you can even pause your policy when you’re not working, saving you money. Find out more about how we support freelancers and get yourself a quote in 30 seconds over on our website.