Spring Statement 2022 – Rise in dividend tax and NI a blow to self-employed

(3 minutes to read)

IPSE: ‘With inflation reaching its highest level in thirty years and household bills skyrocketing, the hike comes at the worst possible time for self-employed workers’.

The Chancellor made his Spring Statement this week, and despite there being slight changes for the better, the overall feeling is that it’s not enough.

For the self-employed especially, the dividend tax hike and National Insurance rise will come as another blow.

Commenting on the Spring Statement, held on the 23rd of March 2022, Andy Chamberlain, Director of Policy at IPSE (the Association of Independent Professionals and the Self-Employed), said, “The Chancellor’s decision, confirmed today, to implement the increases to dividend tax and National Insurance is a blow to those who work for themselves. With inflation reaching its highest level in thirty years and household bills skyrocketing, the hike comes at the worst possible time for self-employed workers. The rise in National Insurance is particularly damaging to those that work via an umbrella company, as these workers are forced to pay the tax twice – as an employer and as an employee. Although the raising of the NI threshold will, to a degree, mitigate the additional burden of this measure, many self-employed taxpayers will still be worse off.

“While we welcome some of the measures announced today, such as the cut to fuel duty by 5p per litre, Rishi Sunak’s announcements today still don’t go far enough for thousands of freelancers that are recovering from the economic uncertainty caused by the pandemic.

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“On welfare, for instance, the Chancellor should have taken the opportunity to suspend the Minimum Income Floor, which would have provided a genuine boost to self-employed Universal Credit claimants who are struggling to make ends meet as a result of the cost-of-living crisis.

“Overall, today’s statement will do little to reassure self-employed households, already struggling as a result of existing government policies such as IR35, and now facing historic inflationary pressures.

Also responding to the statement, Neil Carberry, Chief Executive of the REC, said, “Today’s spring statement comes after the announcement that inflation is at its highest for 30 years. There are also many tax rises coming into force next month, and the war in Ukraine is causing further uncertainty. Now is not the time to be raising National Insurance, the UK’s biggest business tax. Raising the threshold for employees is sensible and will help to soften the blow, but 60% of National Insurance is paid by businesses – this tax rise will place an extra heavy burden on them, especially in labour-intensive sectors like hospitality which are already struggling.

“The Chancellor’s cuts to fuel duty and business rates for retail, hospitality and leisure businesses are welcome. And his plan for incentivising business investment, including looking at the failed apprenticeship levy, sounds promising. But employers have been promised change before – this time, he has to deliver. It will require a real end to policy thinking being restricted to Whitehall. The recruitment industry is ready to come to the table and help government to ensure these new measures work.”

To find out more about contracting please contact Jaime on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.

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