​Following our recent blog about the appointment of Liz Truss as Prime Minister and Leader of the Conservative party, we knew that a mini budget was coming. There were quite a few notable headlines including the cut in basic income tax to 19% from April 2023 which means that an estimated 31 million people will get £170 more a year, as well as the 45% higher rate of income tax being removed which raised some eyebrows. There was also the announcement of a freeze on energy bills which is claimed to reduce inflation by 5 percentage points and also a cut in stamp duty for those buying a property.

As for IR35, the off-payroll rules for clients, workers and their intermediaries, this is set to be repealed according to the mini budget. Put in simple terms, if an individual contracts their services to a company you will once again be in charge of paying the appropriate amount of tax and National Insurance.

With the new format coming April 6th 2023, what does this mean for businesses and contractors? The reforms of 2017 and 2021 to the off paying working rules, known at IR35, introduced a tax law where the end client and not the contractors themselves would be responsible for labelling the working relationship and if it resembled a self-employed engagement or employment. Therefore, the company or business paying the bill (whether that’s a recruitment agency or end client) took on the liability. This prevented agency staff and freelancers in particular from avoiding tax and going through a number of different channels. Whether that was directly onto agency payrolls at a reduced hourly rate, be responsible for their own limited company but be taxed at source, or work via an umbrella company where they would be entitled to some employment rights such as holiday pay.

The government since then has taken on board to criticism it had received despite the ruling's attempt to stop the promotion of disguised remuneration schemes. It was initially introduced to the private sector which many found unpopular and puzzling. This reversal is all part of the Chancellor’s steps to make the tax system easier and also reduce costs for many businesses. It increases the prospects of more social workers turning to agency work and self-employed people being hired during a time where companies are crying out for staff.

Whilst the reform means that workers and contractors will be the ones to submit the appropriate amount of tax and national insurance contributions once again, as for businesses this will free up both time and money. Think about how much extra resource it takes for a company to sort out this admin that could be used for other priorities. It also takes away any risk that self-employed workers are impacted by any underlying off-payroll rules.

This is certainly a positive move for contractors and businesses and is set to help growth within the economy. Plus it takes away the burden of companies working out where an individual stands when hired for their services.

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