With the general election looming, political parties here in the UK have been trying to capture the votes of the population. The manifestos have been released, and here we take a look at what these election promises could mean for contractors. Crucially all the major parties have now announced their policy on the upcoming reforms to the IR35 legislation.
The Conservative Party
“Get Brexit Done. Unleash Britain’s Potential”
As part of their pledge, the Conservative Party will launch a review to highlight areas where the self-employed could be better supported, including making the tax system simpler to navigate, the reduction of business rates, and the tightening of tax evasion legislation. We’ll explore these in closer detail.
The Chancellor of the Exchequer has recently announced that the Conservatives will review the IR35 reforms to the private sector ahead of next year, should they secure a majority.
Although missing from the party manifesto, this was welcome news to contractors across the country.
Tax and National Insurance policies
The Conservatives are pledging to simplify the tax system, and make it fairer. To do this, they have plans in place to boost growth, wages and investment through a revamp of the tax system, and have cancelled plans to lower Corporation Tax, keeping it at 19 percent.
In terms of income tax and National Insurance, their key policies include:
- No rise in the rates of income tax, National Insurance or VAT
- Raising the National Insurance threshold to £9,500 during the financial year 2020-21, cutting taxes for over 30 million workers
The fight against tax evasion
Since 2010, more than 100 anti-avoidance measures have been introduced under a Conservative government. They wish to continue their fight against tax evasion, and to assist in doing so a new anti-tax avoidance and evasion law will be introduced. This includes the following:
- The creation of an anti-tax evasion unit in HMRC that covers all duties and taxes, from errors to deliberate non-compliance
- The consolidation of existing anti-evasion and avoidance measures and powers
- The introduction of a new package of anti-evasion measures
The Conservative Party also believe major multinational companies should pay their fair share of tax, and in doing so, the Digital Services Tax will be implemented.
The Labour Party manifesto for small businesses and the self-employed
“It’s time for real change. For the many, not the few.”
Since releasing their manifesto, the Labour Party have pledged to entirely abandon next year’s IR35 reforms to the private sector. Announced by the Shadow Minister for Small Business, Bill Esterson, a Labour government would see the reforms ‘scrapped’ due to lack of feasibility.
Soon after this announcement, Esterson revealed that Labour policy was to simply review the IR35 reforms before their implementation in April.
Tax and National Insurance policies
The Labour Party aims to create a fairer taxation system, through a few changes to the existing tax system. One of these changes would be to change the rates of Corporation Tax to the following rates:
- 26% for companies making more than £300,000 per year, or;
- 21% as a small profits rate, for companies making less than £300,000 per year
Labour also believes those earning more than £80,000 should pay a slightly higher amount of tax. Although the manifesto does not state a specific figure, it has been reported that the current rate of 40% would rise to 45% and those on an income of £125,000 or more would pay a rate of 50%.
National Insurance and income tax rates will be frozen for those earning under this threshold.
They have also guaranteed that there will be no increases in VAT.
Offering assistance to small businesses and the self-employed
The Labour Party will develop tailored support and protection for the self employed, including: collective income protection insurance schemes, annual income assessments for those on Universal Credit, and better access to mortgages and pension schemes.
They wish to tackle the issue of insecurity through:
- Giving all employees full rights from day one on the job
- Ending bogus self-employment and creating a single status of ‘worker’ for everyone apart from those genuinely self-employed in business on their own account, so that employers cannot evade workers’ rights; and banning overseas-only recruitment practices.
In addition to this, they have pledged to tackle late payments that leave small businesses and the self employed waiting months to be paid, including banning late payers from public procurement.
The Living Wage currently only applies to people aged 25 and over. Labour promises to roll out a Real Living Wage to everyone aged 16 and above, raising it to a minimum of £10 per hour at the same time.
The Liberal Democrat Party manifesto for small businesses and the self-employed
“Stop Brexit, build a brighter future.”
The Liberal Democrats’ primary aim is to remain in the European Union, putting a halt to Brexit. We’ve also covered their other policies which could affect contractors and the self-employed.
Their policies tend to support contractors, freelancers and the self-employed, and are in alignment with many policies from the Association of Independent Professionals and the Self-Employed (IPSE).
They have promised to review the proposed IR35 changes, should they win the race to Number Ten.
Tax and National Insurance policies
The Liberal Democrats have stated that they will restore Corporation Tax to the rate of 20%, keeping the rate stable in future.
It is also mentioned in their manifesto that they will raise £7 billion a year in additional revenue by putting 1p on Income Tax, with this money being reserved on the NHS and social care.
Tough action against tax evasion
Corporate tax evasion is not taken lightly by the Liberal Democrats, and as a result of this they will be clamping down on evasion and avoidance especially by international giants and monopolies, through the following:
- The introduction of a General Anti-Avoidance Rule, setting targets for HM Revenue and Customs to reduce the tax gap, and investing in more staff to enable them to meet it
- Making improvements to the Digital Services Tax to ensure tech giants pay their fair share
- Support the OECD in their proposals to require multinationals to pay a level of tax which is proportionate and appropriate to the level of sales they make in every country in which they operate
Helping contractors and the self-employed
As part of their pledge to contractors and the self-employed, the Liberal Democrats will modernise employment rights by:
- Establishing a new ‘dependent contractor’ employment status that fits between employment and self-employment, this includes access to basic rights such as minimum earnings levels, sick pay and holiday entitlement
- Reviewing the tax and National Insurance status of employees, dependent contractors and freelancers
As well as these points, the Liberal Democrats want to end retrospective tax changes such as the loan charge, and review recent proposals to change the IR35 rules.
For more information
Regardless of which political party wins the race to number 10, they have all made pledges to contractors, small businesses and the self-employed. Receive all the latest contractor news, updates and developments on our dedicated news page.