With over 650 registered for our first webinar of 2022, IPSE’s Director of Policy Andy Chamberlain and JSA Group’s Director of Accounting Services Chris James covered the key tax changes, IR35 developments and government consultations that could impact on the self-employed this year and beyond.

The Health and Social Care Levy

The webinar initially focused on the planned implementation of the Health and Social Care Levy, outlining how the increase in National Insurance Contributions in April 2022 will impact on all areas of self-employment.

From April 2022, a 1.25 per cent increase will be introduced to both employees and employers liable for Class 1 NICs and self-employed individuals liable for Class 4 NICs.

Similarly, a 1.25 per cent increase on the Dividend tax rate has also been announced for April 2022, with the first £2,000 of dividend income set to remain free.

Read IPSE’s response to the announcement of dividend tax hikes here.

The new levy will then take effect from April 2023, a year on from the changes to the rates of NI and Dividend and is intended to cover the cost of the pandemic and ongoing social care crisis in the UK with the money ringfenced estimated to amount to £12 billion per year.

In particular, the webinar discussion highlighted the blatant injustice that those now engaging through an umbrella company and responsible for covering Employer’s NI will be hit on both fronts. In this case, these freelancers will be expected to cover the increase to Class 4 NICs and the increase to Employer’s NI.

IPSE is calling on the Chancellor to delay the implementation of the planned increase to National Insurance and Dividend taxation.

IR35

The webinar then went on to review the impact of recent high-profile public sector IR35 cases where HMRC have claimed that contractors have been wrongly classified as outside IR35 by public sector bodies.

Both the Ministry of Justice (MoJ) and the Department for Environment, Food and Rural Affairs (Defra) have received tax bills totaling £72 million and £48 million respectively.

For the webinar hosts, these high-profile cases only gave greater credence to the notion that the CEST tool is inadequate for determining IR35 status, when government departments are even falling foul of the process.

Read IPSE’s response to the MoJ and Defra IR35 non-compliance verdicts here.

Concerningly, the webinar also highlighted the increasing use of indemnity clauses by end-clients and agencies to indemnify against costs occurred throughout the supply chain by HMRC retrospective checks. On this, the advice is to do your due diligence on these clauses, attempting to negotiate with end-clients or agencies before accepting them – even if we’re still unable to know if these clauses are even legally enforceable.

On a more positive note, outside IR35 assignments are reported to be on the rise, with those end-clients that had previously introduced blanket bans or assessments slowly reversing these decisions.

Call for Evidence: umbrella company market

With the government currently calling for evidence on the umbrella company market, attendees were encouraged to respond to the consultation either directly or through the upcoming IPSE survey that will feed directly into the response.

Answering your questions

With questions and concerns around how the upcoming tax changes could impact on freelance businesses, the webinar also allowed for a Q&A session.

Attendees were able to ask questions on topics such as the upcoming Self-Assessment deadline, IR35 determinations whilst also sharing their experiences of operating through an umbrella company.

As a member, you can watch the full recording of the webinar and any of our other webinar by accessing our webinar library here.