Next Gov't must think carefully before changing regulation of self-employed

Posted On: 
19th May 2017

Andy Chamberlain, Deputy Director of Policy and External Affairs at IPSE, responds to Rachel Reeve's article warning of the potential impact of a Conservative government will have on the self-employed.  

After what happened at the Budget, many are, quite naturally, concerned the Conservatives may want to return to the issue of Class 4 NICs, should they win again in June.

The Conservative manifesto doesn’t include constraining promises against tax increases like the last one did. Therefore it seems inevitable that the taxation of the self-employed would again come under scrutiny by a Conservative-led Treasury.

And so it should. The taxation of the self-employed is a tangled web of complexity and inequity -  it desperately needs reform. At the heart of the problem is a tax system that wasn’t designed for self-employment at all. It is built around traditional employees and employers. The self-employed don’t fit into either category, which is a big problem for the government, and its only going to get bigger as the growth in self-employment continues.

The number of self-employed people in the UK has increased by 47% since 2001. They now represent 15% of the labour force. The old view that self-employment was marginal and benign has been swept aside. The self-employed are here to stay and they are a major asset.

They play a critical role in our economy, producing £225bn of goods and services every year – enough to fund the NHS twice over! What’s more, the self-employed give our economy the flexibility and dynamism to take us through the uncertain years ahead. They are an invaluable resource for larger businesses looking to cope with peaks and troughs in demand, and expand into new markets. That’s why the next government must think very carefully before implementing measures which change the way the self-employed are taxed and regulated.

Next week IPSE will launch its own Manifesto for the 2017 General Election. In it, we will call for a strategic review of the tax system before any individual measures are introduced. Misjudged policies like the aforementioned NICs hike, changes to way contractors in the public sector are taxed and Making Tax Digital have all rightly attracted criticism.

We need to look at the tax system as a whole and consider how it should apply to modern working practices. Rather than announcing a tax hike off the hoof, as happened at the last Budget, the government must consult comprehensively with affected taxpayers and external experts.

The UK’s vibrant self-employed sector is one of its greatest competitive advantages. As we negotiate our way out of Europe, it is more important than ever that we nurture and cherish the flexibility they provide. The next government, whatever its colour, will do well to remember that.