Government’s Renewed Focus on the Self-Employed: Promises vs. Reality
Government attention towards the self-employed has surged recently, accompanied by a noticeable charm offensive. The Chancellor has expressed a desire for small businesses to “make more profit, invest more and spend less time on forms,” while the Prime Minister has pledged to place government “firmly on the side of the people who take risks, start companies, create jobs and bring new ideas to life.” These statements set high expectations as the Burnham government prepares to unveil its first Budget in the coming weeks. However, warm words that fail to translate into tangible support may ultimately undermine trust among entrepreneurs and small business owners.
Every Mile Counts
For many self-employed individuals, particularly those whose business relies on vehicles like vans or cars, operational costs such as insurance and fuel significantly erode earnings. With fuel duty hikes looming once again, the pressure on these workers intensifies. The recent update to the mileage allowance—the first in a decade—was a step in the right direction but falls short of reflecting the true cost of diesel fuel. Because the Treasury reviews this rate only every ten years, it consistently lags behind actual expenses. Aligning the allowance with real-world running costs would empower business owners to accept more jobs and travel further without having to constantly recalibrate their finances.
Less Paperwork, More Earning
The self-employed rarely choose this path for an abundance of administrative tasks. Time is a precious commodity, and bureaucratic paperwork is one of the biggest drains on productivity. While some forms and reporting are unavoidable, there is considerable scope for government to streamline processes. The Association of Independent Professionals and the Self-Employed (IPSE) has been active in this space, collaborating with the government’s Small Business Regulatory Taskforce to reduce redundancy—eliminating situations where company directors must provide the same information multiple times. It is crucial that this progress is reflected in the upcoming Budget to ease the administrative burden and allow entrepreneurs to focus on growing their businesses.
Hands Off the VAT Threshold
There has been debate among tax experts about lowering or abolishing the VAT registration threshold, currently set at £90,000. While it’s acknowledged that this threshold can influence business growth decisions—sometimes prompting owners to limit expansion to avoid crossing the line—changing it is not a straightforward solution. Reducing the threshold acts effectively as a tax increase on the smallest enterprises and sole traders, many of whom cannot afford the professional advice necessary to navigate the VAT system. The introduction of Making Tax Digital for Income Tax has already complicated matters for many sole traders. Instead of lowering the threshold, adjusting it upwards to at least £100,000 would better reflect inflation and the escalating costs of doing business.
Give Businesses a Reason to Spend Again
The rise in employer National Insurance contributions has dealt a severe blow to business confidence. For companies with substantial payrolls, every new hire and pay increase now carries a higher cost, disrupting financial calculations and causing many to stall spending. Projects have been deferred, and contractor engagements paused as firms struggle to absorb these increased expenses. Reversing the National Insurance hike in the upcoming Budget would send a powerful signal to the market, encouraging investment and revitalising economic activity.
Over to You, Chancellor
Recent Budgets have often left the self-employed and small business owners shouldering extra costs or administrative burdens. While government officials have articulated strong support for risk-takers and job creators, many in the sector remain skeptical, anticipating conditions that may not improve. The Chancellor now has an opportunity to prove these commitments are more than rhetoric by delivering practical measures that reduce costs, cut red tape, and foster growth in the forthcoming Budget.
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