What happens after Brexit? Self-employed National Insurance changes explained
While Brexit, along with various government policies impacting freelancers and contractors, has contributed to a difficult start to 2019 for independent professionals, there are reasons to remain positive.
According to IPSE and PeoplePerHour’s quarterly Freelancer Confidence Index, the UK’s impending departure from the European Union and government regulatory policies, such as IR35 reform, have created a bumpy climate for freelancers. As a consequence, a 17% decline in income was reported by the independent professionals surveyed at the end of Q1 of this year.
This will, of course, concern freelancers, but the good news is that despite these difficulties, independent professionals’ quarterly earnings still sit at more than double the level of employees in similar roles.
A drop in earnings was caused by a fall in day rates and a decrease in the volume of work carried out in Q1. When measured against Q4 in 2018, daily earnings in Q1 of 2019, for example, dropped 15%, from £474 to £405. In the same period, freelancers reported a rise in spare capacity, which increased by 4%, from 21% to 25%.
The report does, however, highlight the success of freelancers, who in Q4 of 2018 were able to overcome these adverse business conditions to generate an upturn in their business performance. That said, Q1 of 2019 has not been as fruitful for freelancers generally speaking. When measured across 12 months, quarterly earnings fell from £23,701 to £20,474.
Despite this decline, IPSE makes the important point that the earnings of freelancers remain more than twice the level of equivalent employees. The self-employment body said: “This is an impressive level of business performance that should not be omitted when discussing the findings of the report.”
Nonetheless, the forces at work in the market have led to a drop in economic confidence among freelancers and contractors across the board. The threat of a no-deal Brexit, along with next year’s IR35 reform and the danger it poses, has led to some of the lowest economic confidence since IPSE started the surveys in 2014.
Continued uncertainty surrounding Brexit was viewed as the top factor in lowering freelancers’ earnings performance, with government fiscal policy relating to independent professionals and regulation changes, like IR35, seen as the second and third most harmful issues to these businesses respectively. Looking ahead, 74% of independent professionals also expect the costs of running a business to increase in the next 12 months.
However, amid of all this, a significant number of freelancers are optimistic that day-rates will recover in the next 12 months.
Freelancers and contractors have little or no influence over the big national developments, but there are some aspects contributing to improved business performance over which they have firm control.
The individuals surveyed by IPSE consider brand and reputation as the key driver of business performance, with the ability to offer innovative services to clients as the second most important factor. Contractors also cited collaboration with other independent professionals as another way they can improve their own business performance.
IPSE accompanies the survey results with advice for the next Prime Minister, stating that freelancers’ drop in confidence must be taken seriously by the government. Andy Chamberlain, IPSE’s Deputy Director of Policy, urged the individuals in the running for the Prime Minister’s job to consider the contribution of the UK’s independent workforce.
“Freelancers are clearly extremely frustrated with this Conservative government’s chaotic management of Brexit and business. It should be a stark warning for the Tory leadership hopefuls.”
He added that contractors are “some of the most entrepreneurial and productive people in our economy and they are central to Britain’s business success, whatever happens with Brexit. The new Prime Minister must show the self-employed that they back modern working practices and this £275bn sector.”
In the next twelve months, a new Prime Minister, Brexit and, who could forget, reform to IR35 in the private sector, could each impact freelancers and contractors in different ways.
That said, there’s no doubting the resilience and importance of the UK’s growing army of independent professionals, who offer unrivalled flexibility in times of uncertainty.
There’s no wonder many are turning to contracting as a career choice. As well as a higher income, there’s plenty of additional benefits. If this is something you’re considering then you’re in the right place. Head over to our blog for the latest contractor news and advice.
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