As you are no doubt aware, the Labour Party has succeeded in ousting the Tories from Parliament with a significant majority.

After 14 years of Conservative Party administration, British businesses are now bracing themselves for a radically different attitude to the economy and social policies.

Much has been said on the matter – both by economists and the commentariat – but what matters to you is the key question: “What’s going to happen to my finances now?”

It’s a tough question to answer, especially as Labour has only been in place for a short while, but we’ve scoured their manifesto and comments to try to piece together a prediction for the future.

Here’s what we’ve found…

Taxes and National Insurance

Labour’s 2024 manifesto promised not to raise National Insurance, VAT, or Income Tax rates.

However, you might still face a higher Income Tax burden due to the Conservative’s freeze on the Personal Allowance and tax thresholds.

Whether Labour make changes to this is yet to be seen but we feel their unlikely to amend the current policy.

Stamp Duty, Capital Gains Tax (CGT), and Inheritance Tax are areas where Labour has provided few assurances either.

While ruling out CGT on primary residences, other adjustments in these taxes are certainly on the cards.

Sir Keir Starmer, our new Prime Minister, has mentioned that the temporary Stamp Duty threshold increase for first-time buyers will revert to £300,000 (from £425,000) in April 2025.

Rachel Reeves has also suggested she might introduce measures to address tax system fairness, such as:

• Ending offshore trusts to avoid Inheritance Tax.
• Removing VAT exemption and business rate relief for private schools, with the revenue used to train more teachers.
• Abolishing non-dom status in favour of a scheme for short-term residents.

Labour may also implement the “UK Individual Savings Account (ISA)” to boost investment in the UK economy.

As you can see, the tax waters are somewhat muddy, but it’s probably a safe bet that your taxes will increase over the next few years – unfortunately.

It’s worth noting that Labour could benefit from a potential interest rate cut by the Bank of England (BoE) as inflation meets the BoE’s two per cent target.

This would reduce borrowing costs for those with tracker or variable-rate mortgages, and fixed-rate holders might find better deals upon renewal.

Labour’s housing targets

The Labour Party has said it aims to build 1.5 million homes over five years to address housing shortages. Plans include:

• Funding more council planning officers.
• Reviewing green belt boundaries to prioritise brownfield and “grey belt” land.
• Allowing local authorities to allocate more green belt land for housing.
• Reintroducing mandatory local housing targets.
• Publishing new design codes for better property quality.

Labour also plans to help young people get on the property ladder by giving them priority in new housing developments and introducing a permanent Freedom to Buy mortgage guarantee scheme to support 80,000 young buyers over five years.

State Pension and pension reforms

Labour has said it will maintain the State Pension triple lock until at least 2030, ensuring annual increases based on inflation, average wage growth, or 2.5 per cent, whichever is highest.

Labour will not reintroduce the pension Lifetime Allowance (LTA), providing certainty for savers and avoiding the complexities of reinstating former rules.

They promise to review the private pension system for better outcomes, with reforms expected after the 2025/26 tax year.

They are also talking about increasing UK investment by allowing workplace pension schemes to consolidate and scale effectively.

Perhaps the most politically divisive comments come from the party’s senior tax adviser who has suggested introducing ‘means tested state pensions.’

In other words, despite having paid into the scheme for your entire working life, if you are deemed over the threshold, you could lose all rights to your state pension.

Luckily, the complexity and sheer unpopularity of the idea has caused many to suggest the idea would never actually be implemented.

Employee rights and minimum wage

For business owners, Labour’s “new deal for working people” includes:

• Banning zero-hours contracts.
• Ending “fire and rehire” practices.
• Introducing parental leave, sick pay, and unfair dismissal rights from day one of employment.

Labour also plans to reform the minimum wage to a “genuine living wage” and remove age bands, potentially raising salary costs for businesses employing younger workers.

It is unclear if this would apply to over-16s or over-18s but either way could increase your employment expenses considerably.

Autumn Budget and fiscal events

Rachel Reeves has indicated that Labour will not deliver a Budget without Office for Budget Responsibility (OBR) forecasts, typically requiring about 10 weeks.

Therefore, the earliest possible Budget date is mid-September, with October or November being more realistic.

Labour has committed to one major fiscal event per year, allowing families and businesses time to plan for tax and spending policies.

We feel this is a positive move as multiple budgets, statements and major events can cause a great deal of uncertainty, especially for businesses.

The response to our latest refer-a-friend giveaway has been incredible… but there could be only one winner and one runner-up.

Before we declare who they are, we just want to say a massive thank you to everyone who participated and took the time to recommend our services to their friends and colleagues.

And here is the moment you have all been waiting for – the winner of the 55″ 4K Smart TV is:

Jenny from London

Jenny was in beautiful Porto for the Primavera festival when she received the call from us about her big win having successfully referred her friend to the Cogent fold – making an already wonderful week away even more special.

An avid live music fan, Jenny can often be found at gigs and festivals, as well as live comedy and theatre events. Having moved to London 15 years ago, she really enjoys live performances as she makes the most of what the capital has to offer.

Whilst not a die-hard football fan, she has been enjoying watching some of the Euro matches on her new 55″ telly with her boyfriend who is a massive Portsmouth FC supporter.

A client of ours for 10 years, Jenny is a Chartered Human Factors specialist, working across sectors, currently fulfilling a Working Environment role for a large Norwegian project.

This time around we also had an honourable runner-up, who is now proudly wearing a crisp England shirt as he cheers on the Three Lions:

Craig from Hampshire

Craig and his family, Harrison 11 and Amelia 7, are enjoying the summer of sports and were really excited to watch England’s opener against Serbia.

A Senior Cost Consultant, Craig is cheering on England in his fresh shirt. A former semi-professional footballer, he now enjoys playing golf in his spare time, with his current goal to get his handicap into single figures this year (currently 11.1). He also really enjoys watching his son play football and his daughter dance (tap, modern, ballet and musical theatre).

Thank you to everyone who participated in our recent giveaway at Cogent. We truly appreciate your support! But remember, it doesn’t end there…

It’s coming home!

Because we’re all about the extra time thrill – if England win the Euros, we’ll kick off another round of celebration with a bonus ‘Penalty Shootout’ prize draw.

Everyone entered into the original draw will then also have a shot at winning £250 in Amazon vouchers.

It’s our way of keeping the party going!

Don’t forget, for every successful referral you make, you’ll earn £100, and so will the person you refer!

Refer a friend to Cogent Accountants today.

As the general election draws near, the issue of IR35 and the broader implications for contractors and the self-employed have emerged as a significant political topic.

Various parties are now presenting their stances, with the potential to sway a critical voter base.

Amidst the tumult of recent years, businesses and independent professionals alike seek stability and beneficial policy reform from the incoming Government.

Both the Conservative and Labour parties have pledged to maintain current personal tax thresholds until 2028, effectively increasing taxes as inflation rises.

However, significant reforms or reductions in tax rates have not been part of their main agendas.

Reform UK and Liberal Democrats Focus on IR35

Noteworthy mentions of IR35 have come from the smaller political factions. The Liberal Democrats, through deputy leader Daisy Cooper, have shown interest in reviewing the off-payroll working rules.

More radically, Reform UK proposes to abolish IR35 altogether, aligning with its broader tax simplification agenda.

Labour’s approach to employment status

Labour aims to simplify employment status distinctions, potentially merging ‘Worker’ and ‘Employee’ statuses into a single category.

This plan intends to clarify legal employment definitions, focusing on providing substantial protections and addressing the ambiguities that currently complicate tax and employment law for freelancers.

The Call for Clearer Policies

The Association of Independent Professionals and the Self-Employed (IPSE) has released a manifesto entitled ‘The Courage Economy,’ urging all political parties to adopt more daring and supportive policies for the self-employed.

This manifesto highlights the necessity for a legal and fiscal environment that better acknowledges and fosters the contributions of freelancers and contractors to the economy.

The Need for Systemic Change

Regardless of which party takes power, there is a clear consensus that the existing IR35 rules are inadequate.

Critics argue that these rules have not only failed to meet their objectives but have also hindered the flexibility of the UK’s workforce.

With the contractor and freelancer vote still up for grabs, the outcome of the election could significantly influence the future landscape of employment and tax law in the UK.

This election represents a pivotal moment for policymakers to align their strategies with the needs of a vital sector that champions innovation and entrepreneurial spirit in the UK.

In the last few newswires, we have looked at how you can set expectations and maintain them, and if there is any value in exceeding them.

Whilst your contract may clearly define your role and responsibilities, as well as the project you are engaged in, could there be value in doing more? Or will it just eat into your profits and affect your work/life balance?

With the growing number of people choosing to freelance, the market in some sectors is becoming more and more competitive.

Merely meeting the expectations of an initial agreement often isn’t enough to distinguish a business from its competitors, especially if you are just starting or returning to the contractor life.

Going above and beyond can play a crucial role in securing future work, earning referrals, and building a stellar reputation.

However, contractors must navigate these extra efforts carefully to ensure they do not adversely affect the profitability and benefits derived from a contract.

Achieving more than what’s expected

Contractors looking to exceed client expectations can consider several strategies that enhance value without significant cost:

1. Proactive communication: Regular updates and clear communication can elevate a client’s experience. This helps in managing expectations and prevents any misunderstandings that might arise regarding project scope or timelines.
2. Quality assurance: Paying closer attention to detail and ensuring high standards in every aspect of the work not only pleases the client but also minimises costly reworks.
3. Innovation: Offering innovative solutions that save time, reduce costs, or enhance the product or service can significantly impress clients and make a contractor stand out.
4. Personalisation: Tailoring services to the specific needs of a client demonstrates a deep understanding of their requirements and can lead to higher satisfaction levels.

Balancing excellence with efficiency

While striving to exceed expectations, contractors mustn’t let these additional efforts erode their profit margins or the overall benefits of the contract.

Here are some tips to maintain this balance:

1. Cost analysis: Before committing to extra measures, conduct a thorough cost-benefit analysis to ensure that the added value exceeds the costs involved.
2. Set clear boundaries: Define what constitutes ‘exceeding expectations’ and set clear boundaries to prevent scope creep, which can lead to unanticipated work without additional pay.
3. Leverage technology: Employ technology to streamline processes, enhance precision, and reduce waste. Automation tools can also help in managing tasks more efficiently, allowing for the extra bandwidth needed to go above and beyond.

Contractors who consistently exceed expectations while managing costs effectively build a reputation for reliability and quality.

This reputation becomes a powerful marketing tool, often more influential than traditional advertising.

Contractors should also encourage satisfied clients to provide testimonials or refer their services to others, leveraging their enhanced service delivery into new business opportunities.

Achieving a delicate balance, when maintained successfully, can secure a contractor’s growth and sustainability in the industry.

We recently sent out our 2023-24 tax questionnaires and if you would like Cogent to prepare and file your 2023-24 tax return, please send us your completed Self-Assessment Tax Return Questionnaire.

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 £250. Questionnaires received by 30 September 2024 will receive the full discount on a basic tax return, charged at £95.

If your questionnaire is received between 1 October and 31 December 2024, the fee will be discounted to £130; any returns received after 31 December 2024 will be charged at the full rate of £250.

Please note, that 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 2025.

If you have any queries or haven’t received the questionnaire, please contact our tax department by emailing tax@cogentaccountants.co.uk

Please return your completed questionnaire together with any attachments by email to our Tax Department – tax@cogentaccountants.co.uk

Ever landed a new contract only to lose it later or lose goodwill with a client? Sometimes things go wrong, and at other times we just set the wrong expectations and then fail to deliver or maintain the right relationship.

In the second part of our guide on contract expectations, we look at how you can successfully manage client expectations and why it is vital for contractors and freelancers across all sectors.

The quality of the final product, the experience throughout the project, and effective communication are key to achieving client satisfaction, which could land you more work or referrals.

Understanding the customer

You can’t manage a relationship with your client if you don’t understand them or their business.

Remember, clients not only evaluate the quality of the final work you conduct for them but also their experience throughout the project.

They expect the completed work to meet their needs and meet the expectations you set.

Where this isn’t achieved, dissatisfaction is likely. Contractors and freelancers must actively manage the client’s perception of their efforts and the project’s quality.

Clients’ impressions matter significantly: they need to feel heard, respected, and kept informed.

Even if a professional strives to achieve the specified quality, if the client perceives it as insufficient, the resulting quality will be deemed deficient.

The disconnect

Problems often tend to arise when communication falters and a disconnect between the contractor and client grows.

Discrepancies between the professional’s and client’s expectations can lead to frustration, disagreement, and conflict. These issues may stem from:

• A poor setting of goals
• Inappropriate means of measuring performance
• Issues with trust
• Lack of cooperation
• Misguided priorities
• No or little communication
• Uncertainty about the means and methods of delivering the project

Identifying and eliminating these issues will be essential for meeting client expectations effectively and retaining goodwill.

By aligning perceptions and maintaining clear, consistent communication, professionals can ensure a successful project and a satisfied client.

Setting expectations

Our latest article looked at the inception of a project and how contractors should go about establishing the right expectations.

It is important to quickly revisit this, as it plays a large part in the ongoing management of a contract and relationship.

At the beginning of a project, stakeholders may have unrealistic expectations regarding key performance steps and outcomes.

You must address these expectations early to avoid disappointment or conflict. Aligning promises with realistic understandings sets the stage for successful project execution and delivery.

Project execution

Just as important as the setting up of the project is the initial execution. Initial meetings with key stakeholders are vital. These should cover plans, processes, practices, procedures, and expectations.

Establishing accepted means and methods for conducting the work, addressing issues and risks associated are crucial in fostering an effective working relationship.

Clarifying roles and responsibilities, scheduling tasks, and managing resource tracking and information flow are essential for smooth project execution.

Monitor changes

Make sure you continue to monitor the client’s satisfaction throughout the project. Identify and respond to any perceived changes in satisfaction levels.

Understanding the cause of increased satisfaction can help sustain it while identifying causes of dissatisfaction is crucial for addressing issues.

Conduct informal or formal assessments to maintain a clear understanding of client satisfaction. Something as simple as a quick catch-up call once a month can help, especially if much of your work is now performed remotely.

Commitment management

Maintaining good relations can sometimes lead to over-promising. Avoid this by clearly conveying the certainty of promises and confirming them in writing.

If necessary, take time to research issues before making realistic promises to a client. This should be an ongoing process throughout your contract with them.

Be prepared

Every project has potential problem areas. Being prepared with possible solutions enables quick responses and effective resolution, turning negative situations into positive customer reactions.

Ask customers for feedback on how to improve processes and products. Recognise and act on good suggestions and share the results with the customer to show appreciation and transparency.

Final thoughts

Clients’ opinions are shaped by their interactions with project personnel, management, and other stakeholders such as contractors and consultants.

Even if the team performs optimally, any dissatisfaction from the client can result in the work being deemed deficient.

Managing clients’ expectations involves keeping them informed and explaining unexpected situations.

It requires understanding the client’s team personalities and effective communication. Even the best-laid plans fail. Keeping all parties informed helps manage expectations and resolve issues.

The National Audit Office (NAO) has released a concerning report regarding the performance of HM Revenue and Customs (HMRC).

It highlights substantial service delays that have led to significant frustration and distress among taxpayers.

This report echoes previous criticisms from the Public Accounts Committee, underscoring a continuous decline in service standards over recent years.

Key Findings from the NAO Report:

• Extended wait times: Average call waiting times have seen a dramatic increase, from five minutes in the 2019/20 tax year to 23 minutes in 2023/24.
• Decrease in call handling: Out of 38 million call attempts in 2022/23, only 20.5 million were answered.
• Inadequate correspondence handling: Performance in handling written correspondence has consistently missed target levels since the 2019/20 tax year.
• Increased non-compliance risks: The report indicates that these service level issues could complicate tax compliance, potentially leading to higher risks of non-compliance.

The NAO also critiques HMRC’s shift towards digital self-servicing platforms. Despite the intention to reduce telephone service costs and reallocate resources to more complex support needs, this transition has not alleviated service pressures as much as anticipated.

Notably, around 72 per cent of calls in 2023/24 were classified as “failure demand”, driven by process failures, delays, or customer errors, suggesting that digital services may be contributing to increased call volumes.

We are always here for you so that you will not have to waste hours on the telephone to HMRC.  We will take the burden away from you by offering guidance and support in order to ensure you remain compliant while minimising disruption to your working day.

From the start of the new tax year on 6 April, businesses across the UK have benefitted from a critical change in the IR35 tax legislation, which significantly reduces the financial risk of hiring contractors.

This latest reform ends the long-criticised ‘double taxation’ under the off-payroll working rules, whereby businesses faced excessive tax bills due to incorrect status determinations of contractors.

Under the change, HM Revenue & Customs (HMRC) will now automatically account for taxes previously paid by contractors, such as income tax and corporation tax, when assessing IR35 liabilities.

This change promises to slash many companies’ tax liabilities and streamline the process of engaging contractors operating via personal service companies.

What was the key issue?

The issue of ‘double taxation’ has been a substantial barrier for many businesses, deterring them from engaging contractors due to the fear of inaccurate IR35 determinations and the resultant inflated tax demands.

The previous system did not consider taxes already paid by contractors, leading to unfairly high tax bills for businesses.

This major shift comes after HMRC’s trial of the new offset mechanism from September of the previous year, which has already seen some businesses benefit from reduced liabilities.

Starting from the beginning of the 2024/25 tax year, any unsettled IR35 bills will be adjusted to reflect the correct tax amount, with potential reductions of about 75 per cent in total liabilities, ensuring businesses pay only what is truly owed.

This adjustment is retroactive, applying to cases dating back to April 2017, offering considerable relief and clarity to businesses previously impacted by this issue.

What does this mean for you?

With the removal of this financial deterrent, experts predict a surge in the number of businesses willing to engage contractors, potentially increasing opportunities for freelancers looking for engagements that qualify as outside IR35.

This change not only rectifies a long-standing issue but also opens a new chapter for freelancers and businesses alike.

Your initial interactions and agreements with a potential client are often pivotal to the scope and success of each contract.

These early exchanges lay the groundwork for a successful, mutually beneficial relationship.

Setting the right expectations from the outset not only facilitates smooth collaboration but also minimises misunderstandings – ensuring both parties are aligned with the project’s goals, scope, and limitations.

Based on our years of experience working with contractors and freelancers here are some tips on how you can set the stage for a fruitful contract:

1. Communicate clearly and concisely

Communication is the cornerstone of setting expectations. Be explicit about what you can deliver, by when, and at what cost.

Use simple, jargon-free language to ensure your client understands your services and limitations.

This is also the time to discuss and agree upon the preferred methods and frequency of communication throughout the project.

2. Define scope and deliverables

One of the most common pitfalls in freelance work is the dreaded scope creep. To avoid this, define the project’s scope and specific deliverables in detail.

What exactly are you being hired to do? What are the project milestones? What outcomes does the client expect?

Documenting these details can prevent scope creep and ensure both parties are on the same page.

3. Establish deadlines and timelines

Timeliness is critical in maintaining trust and reliability. Establish realistic deadlines and build a timeline that outlines each phase of the project, including review periods and revisions.

This schedule should be attainable and allow for some flexibility to accommodate unforeseen circumstances.

4. Discuss revisions and feedback

Feedback is a natural part of the creative process. Discuss upfront how you will handle revisions.

How many rounds of revisions are included? What constitutes a revision versus a new request?

Setting clear guidelines on feedback will help manage expectations and avoid potential conflicts.

5. Outline payment terms

Money matters can be awkward but are crucial to discuss at the beginning. Be transparent about your rates, payment schedule, and any other expenses that may arise. What are the payment terms? When and how do you expect to be paid? Clarifying these details upfront will help avoid any financial misunderstandings later.

6. Address availability and boundaries

As a contractor, you might be juggling multiple clients or projects. Be honest about your availability and the hours you’re reachable for discussions.

Setting boundaries early on helps manage your client’s expectations regarding your working hours and response times.

7. Prepare for the unexpected

No matter how well you plan, projects can veer off course. Discuss a contingency plan for potential obstacles or changes in project scope. How will changes be handled? Who is the point of contact for making decisions? Preparing for the unexpected shows professionalism and flexibility.

8. Get it in writing

Finally, ensure all agreed-upon terms are documented in a contract. This contract should include scope, deliverables, timelines, payment terms, confidentiality clauses, and any other pertinent details. A written agreement not only provides legal protection but also serves as a reference point for both parties.

Final thoughts

Setting the right expectations at the outset of a freelance or contract project paves the way for a successful, stress-free collaboration.

By communicating clearly, defining the project scope, establishing realistic timelines, and discussing feedback, revisions, and payment upfront, you can build a solid foundation for a positive working relationship.

Stay tuned for the next parts of this series, where we’ll delve into managing productivity and exceeding client expectations to further solidify your reputation as a trusted contractor or freelancer.

In a significant policy shift, the Chancellor, Jeremy Hunt, has announced changes to the High-Income Child Benefit Charge (HICBC) in the Spring Budget, which will see nearly 500,000 families financially better off in the new tax year.

This adjustment comes as a response to criticisms over the fairness of the tax, which has affected many higher-earning parents, resulting in an effective marginal tax rate as high as 64 per cent.

Details of the change

The HICBC, introduced in 2013, required higher earners to repay some or all of their child benefits after one parent earned more than £50,000.

However, from April this year, this threshold will increase to £60,000 as part of a transition to a new system based on combined household income, which will be introduced in the next few years.

Previously, higher earners faced a reduction in child benefits through the HICBC on a sliding scale, with the charge being dubbed a “tax on children” by critics.

To help with this, the taper threshold will also increase so that child benefits will now only be completely phased out for individuals earning £80,000 or more – with those earning between £60,000 and £80,000 seeing a scaled reduction as they earn more.

Currently, child benefit stands at £24 a week for the eldest or only child and £15.90 weekly for each additional child, totalling £2,074.80 annually for a two-child family.

Any additional children do not receive additional child benefits. Alongside the changes to the earning threshold and taper rates, child benefit monthly payments will increase to £25.60 and £16.95 respectively from 6 April.

What this means for you

Starting April 2024, families could see an average increase in their disposable income by £1,260 due to these changes.

For families with two children, their benefit payments could surge to as much as £2,212 annually.

This adjustment stems from the Chancellor’s decision to increase the income threshold for the child benefit charge from £50,000 to £60,000, effectively exempting 170,000 families from the HICBC.

Why it matters

This overhaul comes after pressure from campaigners and a recognition of the increased financial strains on families.

With tax thresholds previously frozen and wages climbing due to inflation, more parents found themselves eligible for the charge, sparking a call for change.

The Chancellor’s response not only aims to correct an unfair tax penalty but also to ensure that child benefits more effectively reach families in need.

For contractors, freelancers and their families where one partner is in the higher earning bracket, this development means a potentially significant relief and additional child benefit payments in future.

This change is automatic and requires no action from you as it is calculated based on your tax return.

The adjustment to the child benefit charge is a welcomed reform, marking a step forward in fairer tax practices and support for working families across the UK.