IPSE research: a third of freelancers plan to stop contracting in the UK because of IR35 changes

One in seven freelancers (13%) plan to find contracts abroad, one in ten (11%) plan to stop working or retire early and almost one in ten (8%) plan to move into employment. Half of freelancers also said they will only continue freelancing if they can find contracts to which the new off-payroll working rules do not apply.

97 per cent of freelancers said they are either “fairly” (18%) or “very” (79%) concerned about the changes to IR35. 92 per cent also said they think that working inside IR35 and paying employee National Insurance Contributions without employee rights is unfair.

In terms of client businesses, two out of five (39%) of freelancers said their clients will stop using outside-IR35 contractors. Instead, they will either make blanket-assessments that their contractors are all “inside IR35” (20%), engage them through umbrella companies (14%), move their contractors onto PAYE (13%), or stop engaging contractors altogether (11%).

However, 35 per cent of freelancers also said their clients are uncertain (16%) what to do or have not said (23%) what they will do about the changes to IR35.

Andy Chamberlain, Deputy Director of Policy and External Affairs at IPSE, said: “This survey shows that the changes to IR35 are a clear and imminent danger to the self-employed sector and the businesses they work with right across the UK.  

“Two out of five freelancers say their clients are not planning to continue using outside-IR35 contractors and many have already begun laying off their contractor workforce. It is unsurprising, therefore, that almost all freelancers say they are worried about these changes.

“Nearly a third of freelancers have said they plan to stop contracting in the UK – and many more are likely to follow if they can’t find contracts that aren’t affected by the changes. We need to be clear: this will do enormous damage to this £305bn-a-year sector, which will have disastrous consequences for the wider economy.

“Businesses and contractors are simply not ready for the ill-planned and hugely disruptive changes to IR35. Many businesses have not even decided how to respond yet – and many more are planning to break the rules of the legislation by assessing all their contractors as “inside IR35”.

“The government must urgently delay the changes while a full and independent review is carried out. If it pushes ahead regardless, it will do untold damage to freelancers, the businesses that rely on them and the wider economy.”

The latest schism within the Conservative Party

On the one hand, you have Rishi Sunak’s ‘pragmatic’ economic approach, grounded in a desire for stability. On the other, you have a growing caucus of Conservative MPs supportive of Liz Truss’s policies to bring about turbocharged growth and lower the tax burden.

Let’s not forget that Conservative members favoured the Truss approach. Rishi Sunak has the unenviable task of trying to appease the very base of his party that didn’t want him only one year ago. It’s this split within the party that is receiving column inches and captivating party members. But it also does nothing to endear the UK’s smallest business owners, who will no doubt be left frustrated by an apparent dearth of ideas to address many of the issues they face.

What happened at the Party Conference?

After days of speculation surrounding HS2, the Conference finally kicked into life with the re-emergence of Liz Truss at a packed-out event held by the Conservative Growth Group. This is a group of MPs – believed to be as many as 60 – that want to see an end to the current fiscal ‘status quo’ by reducing taxes and boosting growth with measures such as scrapping IR35.

At the event, prominent figures such as Priti Patel and Jacob Rees-Mogg stood alongside Liz Truss in calling for radical change to taxation and a desire to boost the UK’s economic fortunes.

But these sentiments are in sharp contrast to the main event; Rishi Sunak’s first conference speech since becoming leader.

Sunak passionately claimed that the Conservatives “will always be the party of enterprise, the party of small business,” although many of the UK’s 4.3 million self-employed will disagree.

Many will point to the imposition of the IR35 reforms – forcing a large proportion into an unregulated umbrella company market – as well as constant raids on dividend income and increases to corporation tax. For others, it will be inaction on late payment, training and skills, or gaps in support during the pandemic. After 13 years of Conservative government, the self-employed arguably feel more marginalised by public policy than ever before.

Sunak’s use of the phrase “it’s time for change” was also particularly interesting. It's curious that a party that has been in government since 2010 is advocating change. It's also curious that a current Prime Minister, with the power to bring about such change, offered no real insight into what this change would even entail.

Whilst we had some detail given on the plans to outlaw smoking and an overhaul of A-levels, there was also a glaring gap in his speech: a plan to support businesses and encourage growth. This would suggest that the PM is actually content with the current economic status quo and at odds with his assertion on bringing about change.

It’s official, the self-employed are deserting the Conservatives

It will therefore come as no surprise that the self-employed are now looking away from the Conservatives.

This sector is often considered to be a naturally Conservative electoral bloc, tending to favour pro-business and free-market policies. Therefore, the latest polling from the Centre for Economic Performance is particularly pertinent, revealing that just 19% of the self-employed intend to vote for the Conservatives at the next election. When the polling was carried out at the same time last year, this figure was 30%.

Instead, these findings now indicate that 36% of the self-employed intend to vote for Labour at the 2024 election, an increase on 34% from last year. The self-employed are also now slightly more likely to vote for the Liberal Democrats, unsure of their voting intentions or not planning to vote.

Ultimately, the polling provides a bleak snapshot for the Conservatives.

Perhaps it’s time they finally recognise the impressive economic contribution and entrepreneurial drive of the sector and embrace the self-employed in public policy. This sector is not only vital to the UK’s economic fortunes but also represents a significant voting bloc at the next election.