By: Emma Tait-Barber

Spending Review round-up: what it means for freelancers and contractors

The Chancellor of the Exchequer has unveiled the government’s economic plans for the coming year in the Spending Review, announcing that the Treasury will borrow a record £394bn to fund a raft of measures to help the UK navigate the Coronavirus pandemic.

With the impact caused by the virus expected to see the economy shrink by 11.3%, before recovering slightly next year and growing by 6.6% in 2022, in Chancellor Rishi Sunak’s speech, he warned that the “damage is likely to be lasting” and also spoke of “long-term scarring.”

The economic challenges that lie ahead, along with a forecasted unemployment of 2.6m by the second quarter of 2021, led the government to reveal spending plans that Mr Sunak said prioritises “jobs, businesses and public services.” These included:

While these initiatives - along with the extension of furlough - will ultimately affect everyone in the UK, whether directly or indirectly, there was little of note for freelancers and contractors in the Spending Review. Meanwhile, the Chancellor only referred to the ‘self-employed’ once, when touching on the support rolled out for certain groups. For this reason, this Spending Review might be best remembered by independent workers for what it didn’t include.

Focus on spending, not raising revenue

Tax increases to help the government reduce the deficit were not announced, with the Spending Review focusing on money to be spent not raised. While everyone may have grown used to expecting the unexpected in recent times, the Chancellor was unlikely to reveal any tax reforms, given fiscal changes tend to be kept to the Budget.

The next Budget has been pencilled in for March 2021. It’s hoped that by then the UK will have reached the tail end of the pandemic, meaning the government can take stock. There have been rumours about possible changes to National Insurance, Income Tax, VAT and Capital Gains Tax - each of which would impact people working for themselves. However, only time will tell as to whether any of these mooted reforms will materialise.

Excluded freelancers not mentioned

In his speech, the Chancellor didn’t address the reported 3m excluded freelancers, contractors and self-employed individuals who are ineligible for Coronavirus support or can claim relatively little compared to employees.

Certainly, the decision not to stop these workers from slipping through the cracks of either the furlough scheme or the Self-employment Income Support Scheme (SEISS) is something that Sunak has faced criticism for in recent days.

For example, LBC Radio presenter, Nick Ferrari, raised the issue with the Chancellor the morning after the Spending Review. He said: “Chancellor, respectfully, you’ve had 8 months to redo the sums. Why are 3 million people still excluded?

In response, Sunak explained: "I respectfully disagree with the sense that 3 million people have not been able to access any help. Let’s just take one example of the people described to be in that group. It’s people who are not majority self-employed, which means they make the majority of their earnings from being employed. Those people will have benefitted from the furlough scheme."

Earlier this month, a group of industry experts and campaign groups wrote to the Chancellor, proposing a Director’s Income Support Scheme (DISS) that resembles the SEISS, and would allow freelancers and contractors working through their own limited companies to claim up to £2,500 per month from the government.

Whether Sunak will change tack this late in the day remains to be seen, as do the long term implications of the Coronavirus crisis on the tax treatment of millions of independent workers.

Contractor Tax, Budget

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