Following the elation within the contracting sector about the Government’s decision to repeal the 2017 and 2021 reforms to IR35, we are extremely disappointed the new Chancellor has chosen to reverse the measures.

IR35 was among a number of policies targeted by Jeremy Hunt in his emergency fiscal statement this month, which undid the tax cuts announced in his predecessor’s mini-Budget.

While this change is frustrating, it doesn’t materially change the reality of working as a freelancer or add further restrictions to the existing rules.

If you continue to work outside of the off-payroll legislation then you should be largely unaffected, but for those currently deemed inside, this may be a wake-up call to review current opportunities and to see what is out there that might offer more favourable terms.

Unemployment is, after all, at a historic low and many organisations have skills gaps that require filling – the ball is in your court.

Rishi Sunak has now been announced as the new Prime Minister following the resignation of Liz Truss after 45 days in office. Hopefully he will look favourably upon the contracting world.

As always, we will be here to guide you come what may, offering advice and support that makes your life easier.

We are in unprecedented times as energy bills, food costs, mortgage rates and inflation continue to rocket upwards.

The latest Consumer Price Index, which is the official mark of inflation in the UK, hit 10.1 per cent this month, driven up in large part by the cost of food.

Given the propensity for the current cost-of-living crisis to get worse, now is a great time to get your financial affairs in order.

While we can’t tell you best place to invest or save, here are a few simple tips to consider:

Managing and monitoring costs

Have you reviewed your outgoings recently? While there is very minimal scope to switch deals or cut costs, you would be amazed at how many people are on legacy contracts or terms that make their regular costs, such as broadband, higher.

Even small changes could add up to big savings overall, so it is worth taking the time to look at what costs can be cut, with the least effort and impact.

Taking advantage of tax reliefs

There is a wide range of personal tax reliefs available to all of us that we might not take advantage of that could reduce the amount of tax paid.

This is just one example, but if you are married and your partner earns less than the personal allowance (£12,570) and doesn’t pay any income tax you could use the Marriage Allowance to transfer £1,260 of their allowance to you. This could reduce the tax you pay by up to £252 in the tax year.

Re-evaluating existing contracts

Have you been working under the same contract for some time? Does your fee take into account inflationary pressures?

If your current contract isn’t making ‘ends meet’ then perhaps it is time to look elsewhere or seek a new contract with the same engager at a higher fee.

Given the shortage of skills within many industries, some businesses may be willing to meet in the middle or even match your requests given the cost of recruiting and onboarding a potential replacement.

An increasing number of retirees are looking to return to the workplace to supplement their pensions and reconnect with careers that they loved.

The new world of flexible working has never made it easier to choose when, where and how often you work.

If you have previously been a contractor or want to give it a go following a career in regular employment, what do you need to consider:

Changing job requirements

If you have been out of work for some time, it is important that the roles you are applying for align with your needs and skills.

Some jobs may require you to be up to speed on new standards or have different qualifications.

This can even be the case if you have done the job previously, as professional bodies and industries constantly update their policies.

If the role involves technology or certain types of software, you may also need to brush up on new programmes and processes.

If you have considerable experience in a certain field, but do not meet all of the requirements, some businesses may be willing to accommodate any needs that you have.

Costs of work

Although going to work is primarily about getting paid, many roles also incur costs. This can range from investment in new equipment or training to everyday costs, such as commuting, or if you work from home, your electricity and gas.

With the price of everything going up, you really do need to consider whether the fees you charge merit the costs you will encounter.

If you only end up slightly better off, it may not be worth the expense and effort in some cases.

However, this will rarely be the case in most roles, and returning to work could really boost your income during these challenging times and support a higher standard of living during your retirement.

Get connected

If you only recently retired, you may still be quite active on platforms like LinkedIn or have existing connections and contacts that you can rely on to secure new work.

However, if you have been out of work a little longer then you may need to refresh your online profile and build new connections within your industry.

People retire, move on and, more frequently, change the industries they work within. The pandemic saw a huge shake up to where and how people worked, so you can’t assume that your old contacts will still be around.

That is why it is important to put yourself out there and build relationships with agencies and potential engagers of your services.

How much and for how long are you willing to work?

If the return to work is not out of necessity, and you just want a little bit of additional income, you may need to think about how long and for how many hours each week you want to work.

While contracting does offer greater flexibility, there will still be certain expectations within each role and a certain amount of work that will need completing.

If you have got used to the extra free time in retirement, you need to consider the impact that returning to work will have on your life.

Nevertheless, freelancing still gives you greater freedom to decide how often and for how long you work.

Enjoy it

If you have retired and find yourself milling around the house or you miss the busy days of going to work and daily interaction with colleagues, then the return to work can be really enjoyable.

What’s more, you are likely to be in a position where you can choose contracts that are appealing to you, with less concern about how much they pay.

Speak to us

If you are genuinely considering a return to work then we are here and ready to help you with all your tax and accounting requirements, so get in touch if you need support.

Government repeals unfair 2017 and 2021 changes to both public and private sector IR35 legislation from April 2023

Chancellor Kwasi Kwarteng used the recent mini-Budget to repeal IR35 legislation in the public and private sectors, stunning and delighting contractors.

Mr Kwarteng said IR35 reform had imposed “unnecessary cost and complexity” for “many businesses,” so it will be repealed, “as promised by…the Prime Minister.”

In fact, Liz Truss only promised the Off-Payroll rules would be reviewed, but that’s not stopping the contractor sector from celebrating that all IR35 status decisions will be reverting to them from 6th April 2023.

The Chancellor was clear when he said “From this date, workers providing their services via an intermediary will once again be responsible for determining their employment status and they will be responsible for paying the appropriate tax and National Insurance contributions. This will free up time and money for businesses who engage contractors that could be put towards other priorities.”

Until now, a long line of Treasury ministers, backed by HMRC have, contrary to the evidence, said that the IR35 changes of 2017/2021 do not affect genuine contractors – conveniently ignoring the fact some organisations made a blanket determination and banned all limited company workers.

Along with a planned increase in Corporation Tax from 2023 being cancelled, this is great news for contractors and we expect to see clients who were forced to work PAYE or through an Umbrella Company, resulting in a large drop in net income, once again working through their limited company.

You don’t however have to wait until April 2023 to increase your take-home pay if you are currently working ‘inside IR35’ through PAYE or Umbrella. You can do so now by finding and moving to a new ‘outside IR35’ contract working through your own limited company.

As always, we are here to help and advise you.

With a new King at the Palace and a new Prime Minister at Number 10, it was no surprise that the new Chancellor at Number 11 used his first statement to the House of Commons to signal a “new era” for fiscal policy.

It turned out to be a striking change of direction, as the Chancellor opened his speech, saying: “We will be bold and unashamed in pursuing growth, even where that means taking difficult decisions”.

Gone was the Sunak era’s post-Covid emphasis on fiscal responsibility. Instead, in what the Government dubbed its ‘Plan for Growth’, Kwasi Kwarteng set out an approach prioritising tax cuts for individuals and businesses over immediate repairs to the public finances.

The Chancellor’s assumption is that cutting tax rates will boost economic growth and so increase the overall tax take.

This was Mr Kwarteng’s first real test as Chancellor, 18 days into the job, with inflation sitting at 9.9 per cent and energy prices spiking, interest rates rising, a weakened pound, plus the economic recovery from Covid by no means complete.

Only a day earlier, the Bank of England’s Monetary Policy Committee had raised interest rates sharply by half a percentage point to 2.25 per cent – the highest level in eight years – in a bid to stave off spiking inflation.

Despite being a Fiscal Statement rather than a Budget, the policies trailed in the days and weeks running up to the speech suggested that it might prove to be more significant an event than many full Budgets.

• Income Tax
• National Insurance/ Health and Social Care Levy
• IR35 Off-Payroll Working Rules
• Corporation Tax
• Stamp Duty Land Tax (SDLT)
• Annual Investment Allowance (AIA) and SEIS
• Investment Zones
• Energy Bills
• Conclusion

Income Tax

In a speech full of significant announcements, perhaps the most notable related to Income Tax.

The Chancellor announced that the Additional Rate of Income Tax, which is currently 45 per cent on income over £150,000 will be scrapped entirely.

He then moved to bring forward the cut in the Basic Rate of Income Tax to 19 per cent planned for April 2024 to April 2023.

National Insurance/ Health and Social Care Levy

Another landmark policy of the Johnson Government was the 1.25 per cent Health and Social Care Levy paid by employees and employers to help meet the cost of social care.

The current tax year is a transitional year in which the increase has been applied to National Insurance Contributions and it was to have become a standalone tax from April 2023.

Now, the Chancellor has announced that the charge will be scrapped and will no longer apply from 6 November 2022.

He said the reason for the move was to support smaller businesses, help households and boost economic growth.

IR35 Off-Payroll Working Rules

In an unexpected move, the Chancellor announced that the reforms to the IR35 off-payroll working rules in 2017 and 2021 for individual contractors operating via personal service companies in the public and private sectors respectively would be scrapped.

The change means that it will no longer be the responsibility of the organisation engaging contractors’ services to determine whether a contractor should pay tax on the same basis as an employee. Instead, that responsibility will revert to the contractor, as was the case previously.

Cancellation of planned Corporation Tax increase

The last Chancellor but one, Rishi Sunak, had announced a plan to increase the rate of Corporation Tax from 19 per cent to 25 per cent from April 2023 for companies with profits of more than £250,000. Those with profits of between £50,000 and £250,000 would have benefitted from tapered relief, while there would have been no increase for those with profits of £50,000 or less.

In a striking change from the previous Government’s policy, and consistent with the Prime Minister’s leadership campaign pledge, Mr Kwarteng announced that the planned increase will no longer go ahead and Corporation Tax rates will remain at 19 per cent.

He said that the rationale for the change is to encourage the investment needed to help the economy grow.

Stamp Duty Land Tax (SDLT)

In what might prove to become a tug of war between the Treasury and the Bank of England, just a day after many homeowners learned of a painful interest rate rise, the Chancellor offered substantial consolation in the form of a cut to Stamp Duty Land Tax (SDLT).

Indeed, just yesterday, the Governor of the Bank of England wrote to the Chancellor to warn him that tax cuts might mean even sharper interest rate rises.

Undeterred, the Chancellor pressed ahead with a move to double the SDLT threshold from £125,000 to £250,000 with immediate effect. For first-time buyers, the threshold will rise to £425,000 on properties of up to £625,000. The measure will apply permanently.

Annual Investment Allowance (AIA) and SEIS

In another surprise move, the Chancellor announced that the Annual Investment Allowance (AIA) would not fall back to £200,000 in 2023 but would instead remain at its current £1 million level permanently.

Meanwhile, he said there would be a two-thirds increase in the amount companies can raise through the Seed Enterprise Investment Scheme (SEIS) to £250,000 from April 2023. At the same time, the Annual Investor Limit will rise to £200,000.

Investment Zones

The Chancellor also announced the launch of up to 40 Investment Zones. In England, he said the Government is considering time-limited tax incentives for 10 years, including 100 per cent Business Rates relief, 100 per cent first-year allowances for qualifying expenditure of plant and machinery and an enhanced Structures and Buildings Allowance.

He said the Government is also considering zero-rate Employer National Insurance Contributions (NICs) on salaries of new employees in Investment Zones up to £50,270 a year, as well as full Stamp Duty Land Tax (SDLT) relief on land and building bought for commercial or new residential development.

The Chancellor said he will work with the Devolved Administrations to offer similar incentives in Investment Zones across the UK.

Energy Bills

Following on from the Prime Minister’s announcement on 8 September of the Energy Price Guarantee and the Secretary of State for Business, Energy, Innovation and Skills in relation to business energy costs, the Chancellor reiterated the support being offered.

He said that the Energy Price Guarantee, alongside the £400 credit already announced will cut bills by around £1,400 for a typical household in comparison to the levels they were expected to reach without Government action.

Meanwhile, he confirmed that businesses, charities and public sector organisations will benefit from equivalent relief if they had not locked into a fixed-rate tariff by April 2022. That measure will last for six months from 1 October 2022.

The Chancellor said that the Government’s intervention will reduce inflation by around five percentage points.

Conclusion

The speech was a dramatic statement of the fiscal philosophy being pursued by the new occupants of Number 10 and Number 11 Downing Street. They hope that by reining in energy bills and cutting taxes, consumers will be prompted to spend and businesses will be more likely to invest, ultimately benefitting the public finances through increased tax receipts.

Whether that’s likely to be the case will be a point of serious contention amongst economists and various factions of the Conservative Party, especially given rising inflation and the possible impact on interest rates. Many will see the measures as a serious gamble.

What is certain, however, is that businesses will be more interested in what actually comes to pass than any abstract debate about whether the Government is taking the best course of action.

Link: The Growth Plan 2022

Please note that due to impending holiday commitments, our offices will be closed on the following days over the next few weeks:

• Tuesday 27 September
• Wednesday 5 October
• Tuesday 11 October
• Tuesday 18 October

We will be open for business as usual on all other dates.

We thank you in advance for your understanding.

***PLEASE IGNORE THIS REMINDER IF YOU HAVE ALREADY SENT US YOUR QUESTIONNAIRE***

If you would like Cogent / CMEASY to prepare and file your 2021/22 tax return and you have not yet sent us your completed Self-Assessment Tax Return Questionnaire, you will need to do so by 30 September 2022 to benefit fully from our discounted fee.

If you have a second shareholder, they may also need to file a tax return, even if they haven’t previously. For further advice, please contact our Tax Department.

The standard charge including VAT for a basic tax return is £240. Questionnaires received by 30 September 2022 will receive the full discount on a basic tax return, charged at £85.

If your questionnaire is received between 1 October and 31 December 2022, the fee will be discounted to £120; any returns received after 31 December 2022 will be charged at the full rate of £240.

Please note, more complicated tax returns where additional work or supplements are required, will be subject to additional charges.

Our deadlines have been set so that we can complete your return in time to meet the HM Revenue & Customs’ (HMRC) online filing deadline of 31 January 2023.

Penalties for late filing of tax returns can be as much as £1,600, even when there is no tax due, so please ensure your tax return is filed on time, whether you ask us to prepare it for you, or you have made other arrangements.

If you worked via Cogent for the period 06/04/21- 05/04/22, you can request a questionnaire for 2021/22 by emailing tax@cogentaccountants.co.uk

If you worked via CMEASY for the period 06/04/21 – 05/04/22, you can download a questionnaire for 2021/22 by logging into your secure portal at www.cmeasyauth.co.uk using your username and password and clicking ‘Documents’ and ‘Personal Taxes’. If you cannot remember your password, please use the ‘Forgot Password’ button on the login page. If you experience any further difficulty logging into your secure portal, please email tax@cmeasy.co.uk

Due to postal delays arising from industrial action, please return your completed questionnaire together with any attachments by email only to our Tax Department – tax@cogentaccountants.co.uk – if you are a Cogent client for the period or tax@cmeasy.co.uk if you were a CMEASY client for the period.

You are required to file a tax return if:

• You have been asked to file one by HMRC
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• You have a new source of income that needs to be declared.

***PLEASE IGNORE THIS REMINDER IF YOU HAVE ALREADY SENT US YOUR QUESTIONNAIRE**

Liz Truss has been appointed as the new Leader of the Conservative Party and has, as a result, taken on the role of UK Prime Minister.

During her campaign for Party Leader, Truss made more than 149 pledges, including a promise to review IR35 and support sole traders and small businesses.

Now in power, many in the freelancing and contracting community are hoping that she, and her new Chancellor Kwasi Kwarteng, live up to the pledges that were made.

Alongside these specific pledges for the contracting community, Truss and her new Government are expected to make greater tax cuts, including abolishing a planned rise in Corporate Tax and reversing increases to National Insurance contributions introduced earlier this year.

So far, leaders of national associations, including the Federation of Small Businesses (FSB) and the Confederation of British Industry (CBI) have congratulated Truss on her victory but asked her to take immediate action to support businesses across the UK during the current economic crisis.

Martin McTague, National Chair of the FSB, said: “Small businesses are crying out for a comprehensive response which cuts taxes, limits spiralling bills, and provides direct cash support for the smallest businesses.” The FSB wants the new Government to take “bold” action.

The Director-General of the CBI, Tony Danker, has also requested that the Prime Minister deliver economic support for households, workers and businesses.

Finally, Andy Chamberlain of IPSE, speaking to Bdaily, said “IPSE looks forward to working with the new Prime Minister and her cabinet”, in particular their review of IR35, employment status and the Managed Service Company legislation.

He added: “These rules are destroying businesses and holding back the economy – and they need to change now.”

Urgent action

So far events have complicated the enactment of any new legislation, not least the sad passing of Her Majesty Queen Elizabeth II.

However, new energy support measures have been announced. A new Energy Price Guarantee will ensure that “a typical household in Great Britain pays an average £2,500 a year on their energy bill, for the next two years, from 1 October 2022”.

The Government has said this new measure will cap ‘per unit costs’ meaning that savings will remain linked to each consumer’s usage. However, a typical household will save at least £1,000 a year based on current prices from October.

A new six-month scheme for businesses and other non-domestic energy users will also be introduced. After this period ends, the Government will provide ongoing focused support for vulnerable industries.

Further details of this support and the Government’s other tax cuts and promises are expected in an imminent financial statement on Friday 23 September 2022.

The UK is experiencing a critical skills shortage as unemployment falls to the lowest level since 1974.

New data from Office for National Statistics (ONS) shows that the rate of unemployment in the UK fell to just 3.6 per cent in the three months to July 2022.

As a result, many employers are struggling to find candidates for critical roles in their businesses, particularly in highly skilled or specialist areas.

So, what is the solution?

According to a new study, more than three-quarters of employers are turning to contractors to fill the gaps in their workforce, as part of a new approach to doing business.

Why does this matter to you as a contractor?

Knowing why employers want to utilise the services of contractors and freelancers empowers you to make a better case during the hiring process, so you can secure a contract – and in some cases, increase your rate.

Here are the top five reasons why employers favour the services of contractors:

Less risk – Hiring the wrong person can be a costly mistake in several ways. The longer the person remains ‘in post’, the more these issues are compounded and inevitably when they leave or are removed from their position, businesses need to reinvest time and other resources into hiring someone new.

A bad permanent hire can drive down productivity, hurt morale, and even drive away work and other key employees.

In comparison, the relationship between contractors and engagers is more flexible. If a business hires the wrong contractor, it may be easier and cheaper to terminate a contract and find someone more suited to the role.

Increasingly, even where contractors are performing well, businesses like the flexibility that freelancers offer, as they can scale back on their workforce quickly if their economic position worsens.

Speed – Contractors can be taken on faster than permanent hires and it typically costs less to onboard them. It is amazing how much resources and time go into a permanent hire. Add on to this the need to embed them within the work culture and train them, and it is clear to see the headaches that employers face.

Whilst there is a degree of onboarding required for contingent workers, more often than not experienced contractors can come in from day one and fulfil a role thanks to their existing skills and experience.

Broadening talent – Finding and recruiting the best talent can be a challenge and, in this talent-scarce market, many of the most skilled individuals are increasingly recognising the professional, financial and lifestyle benefits of contracting.

To broaden their pool of talent, many employers have no other options than to seek out the support and services of freelancers.

Thankfully, the move to remote working means that the geographic barriers that may once have stood in the way of finding the ideal candidate no longer exist within many roles – bringing new flexibility and accessibility to the job marketplace.

A change of approach – Given the challenges and benefits outlined above, many businesses are already changing their organisational design to incorporate contractors so that they are more agile.

By adopting a greater contingent workforce, businesses are finding that they can adapt better to change, and HR can flex their teams for a business’s dynamic needs.

In fact, according to the report, more than one in three businesses using contingent workers say they do so to improve their agility (36 per cent).

Filling a gap – Sometimes the reason for hiring a contractor, even for a short period, is more practical. As the great talent search continues, employers are using contractors and freelancers to fill temporary gaps in their workforce until they can make permanent hires.

Similarly, with more people taking career breaks and time off for maternity, paternity or adoption leave, a short-term contractor is a great solution to quickly fill a role, without the complexity and cost of a permanent or semi-permanent hire.

Even if a business has a short-term requirement, such as specialist skills to complete a one-off project, then hiring a contractor may make more sense than creating a full-time, permanent role.

That is why 75 per cent of corporate finance leaders questioned said they see contractors as an important part of their company’s recruitment strategy.

Armed with this useful information, you should now have an even stronger position to go out there and win new, more lucrative work – don’t sell yourself short.

How well do you market yourself on LinkedIn? Can potential clients identify your skills, strengths and experience?

In our last few newswires, we have looked at how contractors can use social media platforms, like LinkedIn, to find new work for themselves.

Now we take a look at the improvements you can make to your profile and activities you can undertake to get noticed and secure new work.

Introduce yourself

One of the most important parts of your profile is your summary and ‘about’ section. These are the first things that appear below your name when it appears in searches.

The summary should do exactly what it suggests, sum up your areas of expertise. When searching through a list of candidates, this is the first thing potential recruiters see and it can sway a decision – first impressions count.

Below the summary is the ‘about’ section, where you can talk at more length about your skillsets, interests, passions and experience.

Try to keep this concise and engaging, focusing on your core skills and expertise. Don’t be afraid to get a little creative, as it will help you stand out from the crowd.

Update your skills and experience

It is amazing how many LinkedIn profiles are out of date or simply do not contain any real information about a person’s skills, experience, education or expertise.

Although adding new skills or job experience may seem inconsequential, for those seeking out contractors and consultants, it can give them a clearer picture of who you are.

LinkedIn has a highly advanced search algorithm, which allows recruiters and the engagers of contractors to look for the most minute details.

This covers everything from skills to accreditations, membership of networks and even a person’s interests.

That is why it is important to check your current skills listing and add to it if there are gaps. It might be that you have gained new skills or perhaps there were some skills that you missed during the creation of your profile.

Seek recommendations and endorsements

LinkedIn allows you to accept endorsements of your skills and recommendations from your connections.

If you are coming to the end of a contract, why not reach out to your main points of contact within the business and ask them to give you an endorsement or recommendation on LinkedIn.

These can boost your position within the search algorithms and are also a great way to promote your expertise to those landing on your profile page.

Join networks and groups

You can join a wide number of groups and networks on LinkedIn. These are small forums where people can share posts and information. They can be a useful resource for finding work.

However, being part of a network or group also allows recruiters and engagers to find you more easily, as they can search by network or group to find people with similar skillsets or interests.

This can be a great way to get yourself on to a shortlist of candidates, where businesses are using LinkedIn to find potential contractors.

Be active

The personal accounts that achieve more on LinkedIn are the most active ones. If you are creating content and sharing and liking other people’s content, you are going to build connections quickly and be seen by more people.

Try and set yourself a target of liking or sharing five posts a week and try to create at least one new post a month. You may be wondering what you can post about…

With LinkedIn, there is a wide range of things to consider posting about from topical news in your industry to personal achievements or even interesting anecdotes from your career.

By creating engaging content and being more active, businesses will find you more easily and you can quickly expand your connections.

We hope you have found our recent series on LinkedIn helpful. It is a great tool for securing new work and with a few simple steps, as outlined in this and our previous articles, you can achieve much more with the platform.