Every Chancellor of the Exchequer knows that, whenever they present their Budget, the media will deliver a broadly negative headline. You simply cannot please half the people for some of the time, let alone all the people for none of it.
However, any politician or party who makes a pledge not to increase taxes is shooting themselves in the foot. Why even say it in the first place? The reputation of politicians is at such a low ebb that making promises that are likely to be broken, simply erodes their credibility even further, if that’s even possible these days.
This week’s Spring Budget saw Chancellor Philip Hammond hauled over the coals by the media regarding his treatment of the self-employed. Proposed increases in National Insurance Contributions (Class 4) from April 2018 are designed to deliver more parity with those who are employees. Personally, I don’t have an issue with that. In fact, I’m surprised it’s taken so long to be reformed. We should all contribute fairly to the State Pension.
Despite what the media reports, this adjustment will not deter would-be entrepreneurs and individuals who want to work for themselves. The fact is, speaking from my own experience as someone who has run their own business for 9 years, there’s more to being self-employed than National Insurance.
For one, I don’t need to pay to go to my place of work. I have a home based office so Blackbird PR can offer its clients a low overhead business model. Many of my friends who commute into London have to commit more than £5K of taxable income just to get to work. Self-employed business owners who work from home are also able to claim a proportion of their utility bills, plus a Homeworker’s allowance of around £150 per year. Then there’s the decrease in corporation tax from next month and the proposed deferment of the quarterly VAT reporting system for 1 year. Not to mention the increase in the Personal Tax Allowance. Of course, the decrease in the amount of tax free dividends is something of a blow but what did we expect? I’m simply motivated to work harder because there’s no way I’m altering my life course.
Putting aside the direct financial give and takes, self employment offers people the chance to make their own decisions and choose their own work-life balance. That carries tremendous value for which there’s no fiscal point of reference. One could argue, in fact, that thousands of people actually would be happy to take a pay cut in the short-term if it gave them the opportunity to start their own business. Many though are not prepared to take the risk.
The vote for Brexit has steered the UK into unchartered territory, so the Treasury is bound to look at ways of ensuring the resilience of the tax base. There’s so much more to self employment than just the monetary implications, both for and against.