Self-employed face new onslaught in the Budget

Philip Hammond is this week expected to risk a new political storm by announcing plans to raise billions of pounds from Britain’s army of self-employed workers and contractors.

Chancellor Philip Hammond is this week expected to risk a new political storm by announcing plans to raise billions of pounds from Britain’s army of self-employed workers and contractors.

Hammond will unveil his Budget on Wednesday amid a gloomy outlook for the economy and the public finances. In a speech that economists said would be cautious, the Chancellor is likely to tighten the tax rules under which freelance workers are paid.

Hammond’s March Budget was derailed by a row over hikes in National Insurance Contributions for self-employed workers.

Criticism: Anne-Marie Trevelyan MP, right, said Conservatives should be supporting self-employed people

Criticism: Anne-Marie Trevelyan MP, right, said Conservatives should be supporting self-employed people

A repeat this week could be politically fatal for the Chancellor, who has struggled to win over Tory backbenchers because of his lukewarm attitude to Brexit.

Treasury officials are thought to be considering two major proposals. One involves a plan to extend ‘off-payroll working’ rules which would force big companies to deduct tax and National Insurance Contributions automatically from the gross pay of self-employed workers who work through personal companies.

The rules, which came into effect for the public sector in April this year, could be extended to all private sector businesses.

Lee Hamilton, a partner at accountant Blick Rothenberg, said there was ‘mounting pressure’ on the Government to apply the rules to the private sector to make the system more fair and to address fears that tax is being lost because contractors are not adhering to the rules. ‘A change is coming,’ he said.

The Treasury estimates that the public sector off-payroll moves will raise £800million over five years. The private sector change could raise twice as much, experts said.

A second proposal relates to existing Treasury plans to lower the threshold at which small businesses have to register and pay VAT. 

Chancellor Philip Hammond will unveil his Budget on Wednesday

Chancellor Philip Hammond will unveil his Budget on Wednesday

The threshold could be brought down from a taxable turnover of £85,000 to as little as £26,000. A reduction of that magnitude would raise £2 billion a year.

Tory backbenchers have been arguing against a reduction in the threshold and have warned it would tie up hundreds of thousands of small businesses in red tape.

Anne-Marie Trevelyan, backbench Conservative MP for Berwick-upon-Tweed, said: ‘A number of us have made it very clear that this would be unacceptable.’

She said Conservatives should be supporting self-employed people rather than trying to squeeze them for more taxes. ‘Self-employed people take risks,’ she said. ‘It’s as if the Treasury has forgotten our aim should be to encourage risk-taking.’

Chris Bryce, chief executive of the Association of Independent Professionals and the Self Employed, said: ‘The nation’s self-employed could be excused for thinking Mr Hammond is waging war with the way they choose to work.

‘If off-payroll rule changes are extended to the private sector, the implications would be disastrous.’

He said VAT changes would ‘lead to serious cash flow problems for many of our smallest businesses’.

The Chancellor reportedly plans to rework public finances, releasing an extra £5billion. But there were concerns measures to ease rising business rates would be restricted to an early switch to the Consumer Prices Index of inflation. 

Robert Hayton, executive vice president of advisory firm Altus Group said: ‘He should be bolder.’