Conservatives National Insurance Rise
It seems inevitable now that the Conservatives National Insurance Rise, which they took out of their Budget, will be re-imposed on contractors after the election.
This National Insurance rise was the idea of Matthew Taylor whom they have commissioned to make a report.
The Matthew Taylor Report on Self Employment will be out, handily, soon after the election.
This Conservatives National Insurance rise was a first taste of what is going to happen after the report comes out.
Tougher Definition of Self Employment
The report is expected to have a much tougher definition of self employment.
Chancellor Hammond published in his Budget, backed by Prime Minister May, a proposal to raise National Insurance for freelancers.
However, there was a pledge in the Manifesto from 2015 that the Conservatives would not raise National Insurance.
So, under pressure from their backbenchers they took it out.
Now the Chancellor Philip Hammond has a £2bn hole in his budget.
He said that he will fill that in the Autumn Budget.
So, how will they fill that hole?
Here’s a clue.
Promise Not to Raise National Insurance Out of Manifesto
In the Conservative Manifesto, published yesterday, the promise not to raise National Insurance was taken out.
So, that is that problem fixed.
And re-instating the Conservatives National Insurance rise will fill that hole exactly.
So, what do you think they will do?
It seems a raging certainty that Chancellor Hammond will re-instate that national insurance rise. He didn’t want to take it out in the first place.
If bookie Paddy Power took odds on the chance of it happening they would be paying out now.
Attack on Contractors After Election
However, that will be just the first instalment of the full scale attack on contractors after the election.
The trigger will be the publishing of the Matthew Taylor Report on Self Employment in June.
So, we won’t have long to wait.
This will be chock full of ideas to bash contractors and take their money.
Easy Targets for Politicians
Those in self employment are easy targets.
There is the party of big business and the party of the worker.
There is no party for those in self employment.
This is despite the fact that there are now 4.8m people in self employment now.
This is 15% of the workforce.
In America those in self employment are now 50% of the workforce.
Pundits expect this to happen here too.
Tax Contractors to the Hilt
So, it makes sense for the Government to attack them now and tax them to the hilt whilst they have only 15% of the working population.
Once they get to 50% they may have too powerful a voice.
But by then it will be too late.
Whichever major party is in power will cut them down to size before we get there.
Labour Will Abolish Umbrella Companies
Labour’s Manifesto states that they will abolish umbrella companies. They will also change the law to make the assumption that all workers will be treated as employees unless the client company can prove otherwise.
Indeed the company and the agency will have to make sure that all taxes are paid and that all benefits go to the contractors.
They are obviously trying to fix the problem of zero hour workers and those being exploited by unscrupulous employers.
However, like with IR35, it will suck contractors, freelancers and locums in too.
Conservatives Polices on Contractors
So, what else do the Conservatives have in store for us?
Well the recent changes in the IR35 rules in the public sector are a clue.
Contractors can no longer decide their own IR35 status in the public sector.
The client department will decide it for them.
They have a new IR35 Employment Status Test to help them.
What happened in the public sector, according to one agency, was that 40% of all those who previously operated through a limited company, were now inside IR35 and either had to pay IR35 tax or join an umbrella company. Most joined umbrella companies.
However, some major Government departments, e.g. the NHS, MoD and HMRC decided that all their contractors were inside IR35 and any contractors filling them would have to pay the IR35 tax.
The big consultancies, who stood to benefit, advised them to do this ‘to be on the safe side’.
IR35 Changes to Roll Out in Private Sector
The agency mentioned above, who have contractors in at HMRC said that they know of one contractor there who was already working on a plan to roll this out to the private sector in 12 months time, i.e. next April.
What the Conservatives plan to do is obviously much more important to contractors than what the Labour manifesto says.
After all the Conservatives have a lead in the polls of up to 20%.
And who knows who will be writing the Labour manifesto the next time they have a chance of Government.
So, it is the Conservative manifesto that contractors should be most fearful of.
Contractors Paying Less Tax
Theresa May and Philip Hammond have said “Why Should a self employed person earning £100,000 a year pay less tax and National Insurance than a permanent employee earning £100,000 a year.
Well, that is not comparing like with like.
However, we can see from that this that they aim to rectify that.
One could ask the Prime Minister two questions.
1. Why should a Tory Grandee with an offshore Trust Fund pay less tax and NI than a contractor earning £100,00 a year
2. Why should a multinational company making £100m a year pay less in tax than a contractor earning £100,000 a year?
What’s in Store for UK Contractors
So, what do the Conservatives have in store for us after the election?
1. The National Insurance Rise is a racing certainty.
2. The IR35 changes from the public sector are pretty sure to be rolled out in the private sector too.
3. There will be a much tougher definition of self employment after the Matthew Taylor Report come sout in June.
It looks as if life will be even harder for contractors after the election – with only IPSE for protection.
The Conservatives National Insurance Rise will be just the first instalment.
Party of Those in Self Employment
Perhaps someone should form a party for those in self employment.
They could get not only those who are in self employment but maybe their spouses and partners too and other relatives.
Or maybe the LibDems could become that party.
From what has been seen so far there is nothing much threatening in their Manifesto for contractors.
And they did want to abolish IR35 before.
Or is this just wishful thinking?
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