Seven questions to ask yourself before sending a portfolio
There are many things that make the difference between a successful and an unsuccessful portfolio, and there are some factors that are out of your ...
This election offers all political parties a golden opportunity to set out how the next government can support self-employment and develop new approaches to the modern world of work. The prize if they do is substantial: winning the trust of nearly 5 million voters across a diverse range of ages, backgrounds and sectors in every part of the country.
Self-employed people contribute £305bn to the UK economy and bring much-needed flexibility, skills and innovation to the public and private sectors – they are the lifeblood of the UK economy.
However, the UK’s tax and employment system does not work well enough for them.
IPSE’s Confidence Index has highlighted how Brexit has caused uncertainty, putting investment decisions on hold and negatively affecting freelancers’ confidence in their businesses for the last three years.
As long as leaving without a Brexit deal remains a possibility, the government should ensure the UK’s smallest businesses are considered in its preparatory guidance notes with a dedicated section focused on small businesses and the self-employed. Longer term, freelancers want to see access to the Single Market for services and the free movement of skilled professionals prioritised.
Maintaining these will enable freelancers to remain competitive when looking to win work overseas. It will ensure the UK’s self-employment success story continues regardless of the outcome of Brexit.
There is clearly an opportunity for any political party that vows to support self-employment. We believe the next government should be pioneering a bold approach that looks to lift the burden of admin and provide greater clarity across a range of areas.
Irregular income is the number one concern of the self-employed. A new Government can offer freelancers a secure financial future through a review of the tax system to clarify issues such as IR35, clamp down on late payment and enable better access to financial products like mortgages and pensions.
The government should drop the harsh retrospective approach HMRC has taken on the Loan Charge until the conclusion of the ongoing independent review.
The government has an important role to play in ensuring there is clarity about who is genuinely self-employed and what they should reasonably be entitled to. Confusion about employment status is at the heart of many of the tax and legal problems that freelancers encounter.
The UK needs a statutory legal definition of self-employment.
Many self-employed people are excluded from reasonable support. A more inclusive approach to freelancers would benefit them in their work and home life and ensure they can continue to add value to the UK economy.
Freelancers deserve adequate paternity and maternity rights, which will support them to take up training. The welfare system, particularly Universal Credit, must be more sympathetic to their needs.
If the apprenticeship levy was broadened into a wider skills levy, it would give businesses – including recruitment companies – the flexibility to invest in their self-employed workers and offer them different types of training.
While the UK is generally a good place to start a business, there are many practical difficulties that mean for many people it is not possible to become – and remain – a freelancer.
As freelancers work at home and on the move, priorities should include, firstly, improved broadband and mobile coverage across the UK. A new Government should commit to super-fast broadband service for all by 2025, and hold to the commitment to ensure the majority of the population are covered by a 5G signal by 2027.
Increasing the availability of work hubs or co-working spaces in the UK’s towns and cities could also incubate more small businesses, as well as innovation and collaboration.
The new world of work is agile, flexible, digital and connected – it is now time for politicians to respond in this election and build a policy environment to match.
UK workers are entitled to at least 28 days of paid leave a year, for someone working five days a week, but journalists on “casual” or “self-employed” contracts are often missing out, the union has said.
This is despite them working in a way that might them “worker” status under the law and so entitlement to holiday pay.
The NUJ is campaigning for freelancers to demand their rights after a survey of its freelance members found that 88 per cent did not receive holiday pay.
The union said media workers could be entitled to holiday pay if:
The union said it has “successfully disputed” standard contracts that state an individual is self-employed, or an independent contractor.
IPSE’s research shows there are now almost two million (1,907,000) self-employed people over the age of 50 in the UK: a number that has increased by 58.5 per cent in the last ten years.
The growth is even bigger among highly skilled freelancers. Today, there are almost a million (950,000) highly skilled freelancers in the UK: a number that has risen by 68.2 per cent in the last ten years.
A new IPSE report on the motivations and challenges of the self-employed shows why so many older people are turning to self-employment. They said the four key factors are:
One in four older freelancers did say, however, that losing their previous job was a factor in turning to freelancing. This is compared to just seven per cent of 16-29-year-olds.
The UK’s complicated tax system is causing difficulties for self-employed people and private landlords and should be simplified using digital technology, a government adviser said.
Options include requiring organisations that hold data about the earnings of self-employed workers and private landlords to share this directly with HM Revenue & Customs.
HMRC should also improve the online accounts available to taxpayers so they can see information about different types of income in one place and make ad hoc payments towards their tax bill, should they wish to.
The government should also look at whether people filling out tax returns would benefit from reporting information more regularly to HMRC using their online account. Currently, individuals do this once a year through a tax return.
The suggestions were made by the Office of Tax Simplification (OTS), an independent statutory body that aims to simplify the UK tax system, in a report published on Thursday. It called on the government to explore the proposals further.
The rise of the gig economy has led to a ballooning of the self-employed population, which now totals 5m people, up from 3m at the start of the millennium.
Bill Dodwell, OTS tax director, said: “Too many self-employed people, and to some extent, private landlords, find it hard to understand tax and comply with [the tax system] so they end up having compliance failures and all the cost and worry that comes from that.”
HMRC figures released this year showed an increase in lost tax — money that should have been paid but was not — from those who fill out a tax return, which includes private landlords and self-employed workers.
Freelancers are more worried about HM Revenue & Customs’ attitude towards the self-employed than the impact of the UK’s departure from the EU.
In a poll of more than 1,000 contractors and freelancers, the great majority felt the UK tax authority had “an agenda against the self-employed”.
Asked to identify the biggest threats to their business in the next year, a whopping 83 per cent opted for HMRC’s treatment of the self-employed. This was followed by 11 per cent who named Brexit and 4 per cent who cited political uncertainty.
When asked what effect Brexit would have on their prospects, around two-fifths said they did not know, just over one-third said it would have negative implications, about a fifth thought it would have no impact and a further 5 per cent said it would be positive.
Another forthcoming change is expected to off-payroll rules, known as IR35. Currently, individuals who use limited companies and work for private sector clients assess whether they are employed for tax purposes — and liable for employee taxes — or self-employed for tax purposes and therefore pay corporate taxes, which are typically lower.
However, from April 2020, all companies — apart from those with fewer than 50 employees or less than £10.2m annual turnover — will be required to assess the employment status of any contractor they use. If a company decides a contractor should be treated as an employee, it will be liable for deducting the correct tax, including income tax and national insurance.
The reforms build on similar changes made to the public sector in 2017. HMRC estimated that, outside the public sector, only one in 10 people who should be paying tax under the current IR35 rules is doing so correctly. However, contractor groups dispute these figures and business lobbies have warned the changes will embroil workers and groups in disputes and red tape.
Despite the unpopularity of the changes, however, the survey found that only 10 per cent of contractors plan to stop contracting when they come into effect. Just over half of those surveyed said they would continue working as contractors, while about 40 per cent said they were unsure what to do.
Mr Maley added: “While HMRC’s treatment of contractors is concerning, we have noticed that many private sector firms recognise the importance of independent workers and are, contrary to reports, prepared to engage them outside IR35 when reform is enforced next April.
Self-employed workers who choose the “Monzo of pensions” to manage their retirement pot will be charged more than 70pc over the odds.
Penfold compares itself to Monzo – the bank account of choice for young savvy savers – but targets pensions for the self-employed, a rapidly expanding demographic that is failing to save enough.
But its comparatively high fees have raised eyebrows.
Despite their money being put in the Vanguard Life Strategy range of funds, which normally charges 0.22pc a year, Penfold customers will pay 0.8pc a year because of the provider’s 0.58pc platform fee.
By contrast, a self-invested personal pension (Sipp) with AJ Bell would typically cost 0.25pc plus fund charges, bringing total charges to 0.47pc if money is invested in a Vanguard fund – 70pc cheaper than Penfold.
Government-backed scheme Nest charges 0.3pc a year plus a 1.8pc “contribution charge” on new savings, while a customer of Hargreaves Lansdown would pay 0.45pc plus investment fees.
Fund charges will be levied by all providers on top of any platform fees, but some providers will allow savers to invest their money in different, lower-cost funds.
The Vanguard fund is a “passive tracker” which means it aims to replicate the market. A comparable option from Lyxor charges just 0.04pc, meaning a customer of AJ Bell holding this fund via a Sipp would pay 0.29pc a year, as opposed to the 0.8pc charged by Penfold.
A spokesman for Penfold said the firm “isn’t aiming to be the cheapest provider on the market”. He also pointed out that some providers charge a flat fee, which can work out to be very high when a saver is starting out with only a few hundred pounds.
High charges can make a big difference to a final pension pot. Calculations from AJ Bell showed that someone investing £1,000 a year for 20 years and paying 0.8pc would end up with £32,690 assuming their pot grew by 5pc each year. The same customer would have £1,100 more if they paid 0.5pc.
Business and tax groups have demanded the government delay forthcoming sweeping changes that affect how UK companies hire temporary workers, as research revealed many businesses are underprepared.
Freelancers who work for private sector businesses and operate through a limited company currently assess whether they are employed or self-employed, and therefore liable for employee or corporate taxes.
But from April, the government is changing the “off-payroll” rules, known as IR35. All large and medium-sized UK companies will be responsible for assessing the contractors they use and liable for deducting income tax and national insurance if they deem them an employee.
The measures have been brought in to tackle what HM Revenue & Customs, the tax authority, calls “disguised employment”. This is when workers are treated as self-employed contractors, despite in effect being employees, meaning both sides pay lower taxes. HMRC estimates that only one in 10 people in the private sector who should be paying tax under the IR35 rules are doing so correctly.
Many business leaders still feel unprepared for the IR35 changes, given the sheer complexity of the reforms and the limited bandwidth that firms have to deal with new regulations,” said Tej Parikh, chief economist at the Institute of Directors, a business lobby group. “It would be best to delay the changes, or adopt a light-touch approach to its enforcement, particularly while the economic environment remains challenging.”
The changes to the private sector were first consulted on in spring 2018, after being introduced in the public sector in 2017. They were widely expected to come into force in April this year. But in last year’s Budget the then chancellor, Philip Hammond, said he had listened to business concerns and pushed back the rollout to April 2020.
Despite this extra time, the legislation needed to enact the reform has not yet been passed. Richard Hill, head of Legal Resourcing at Konexo, a division of law firm Eversheds Sutherland, said he expected it to be part of a finance bill early next year.
Around two-thirds of freelancers say they regularly feel lonely due to their work, with a further 59 per cent saying they suffer from work-related anxiety, according to new research from office stationery and furniture suppliers, Viking. The survey also suggests that 60 per cent say their quality of sleep is negatively affected by work, whilst over half read work emails on holiday.
The study, which surveyed 1,500 freelancers and office-based workers, sought to discover the effect of working freelance on mental health whilst also comparing the positives and negatives of working freelance to being an office-based worker.
The effects of spending long days working alone mean that 56 per cent of freelancers said they suffer from depression as a result of their job, with a further 62 per cent saying they feel stressed due to work. This is compared to office-based workers, where less than one-in-three said they suffer from depression and just 55 per cent feel stressed.
The survey also claims that freelancers find it harder to switch off from work when on holiday. Three-in-ten freelancers take their work laptop on holiday, with over half-reading work emails and 48 per cent replying to them. In comparison, fewer than half of the number of office-based workers take a laptop away, 36 per cent read emails and 30 per cent reply.
Just 15 per cent of freelancers said they avoid work altogether when on holiday, meaning that 85 per cent never take a complete escape from their day-to-day routine. When it comes to office-based workers, 42 per cent said they avoid work altogether. Despite this figure being lower, it still shows that 58 per cent of the population aren’t taking a much-needed break to recharge batteries.
Loneliness was a common theme in the responses from freelancers. As well as 64 per cent saying they feel lonely on a daily basis when asked to rank the worst aspects of being a freelancer, feeling lonely at work was chosen by 53 per cent of respondents. The lack of support for mental health issues came fifth in this list, showing that freelancers feel unsupported when it comes to this issue.
He has a full-time job that takes up all of his time – and sees him on shifts until way into the early hours.
But despite working as hard as he can, Patrick Butler still has to rely on benefits to make ends meet.
The 56-year-old is a van courier and spends his days zooming around London dropping off parcels.
From his minimum-wage pay, he has to stump up £280 per week to rent the van he uses, pay for diesel and settle any congestion zone charges. After he’s covered his rent, too, there is usually nothing left.
As Patrick says: “It’s criminal, this business. You’re working for nothing. For multi-drops or drops, you’re paid £1 or £1.50 per item.
“I’ve had to go on Universal Credit to top up my wages. You’ve got people working 24/7 to try and make ends meet.
“You switch on the radio in the morning and hear about accidents – you just know it’s drivers falling asleep at the wheel.”
Patrick, who lives with his wife and daughter in Walthamstow, London, is one of the UK’s 4.6 million gig economy workers. He’s been forced into self-employment, so he doesn’t enjoy the rights of an employee and barely earns enough to live, let alone save.
As he says: “I’m self-employed but we should all be employed. It’s not like we can decide not to take a job. They want everything from you but you don’t get anything back.”
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There are many things that make the difference between a successful and an unsuccessful portfolio, and there are some factors that are out of your ...