During the late 1990s and early 00’s the UK Government made it far easier for people to start their own businesses. It led to a boom in “micro-businesses”, small companies that might have a single employee and could be nothing more than a hobby creating some money on the side. Today we’ve seen the concept grow into the “gig economy” where companies enlist the services of armies of the self-employed and micro-businesses to meet their needs.
This week’s announcements by the Chancellor during his Budget seem to attack this model. Although the self-employed receive no sick pay or holiday pay, they’re on the receiving end of tax hikes designed to “make the system fairer” without extending the benefits of that system. The same is true for small limited company owners who have seen the tax-free limits on the dividends they can take from their businesses cut.
There’s another element at play that makes this Government seem to want to attack the solopreneur. Within Government the armies of contractors that work on IT projects are finding their status is being challenged with the intention they’re pulled into the net as “full time employees”. This has led to reports of contractors quitting, others refusing to take on extensions and a growing resource problem on Government projects. What’s more, it also appears they are extending this “anti-contractor” philosophy further up their supply chain with reports that suppliers are being required to ensure the contractors they use are treated as employees.
The thought going through my mind is whether this is part of a strategy within Government to effectively kill off the troublesome micro-business sector and make it less appealing for these small businesses to start. Is it part of a plan to push potential entrepreneurs into forming limited companies with multiple directors as a way of increasing tax yields? Could we see changes to company formation rules that make it impossible for solopreneurs like me to operate as a limited company, while at the same time making it too expensive to consider “going it alone”?
As an independent freelancer working through a limited company I am of course deeply concerned about this. Plans for my business already took a knock in June ’16 and I suspect more is to come. But while I have set my future on a specific path that will see it radically change and exit the UK, I can’t help but feel for those who are going to be left to deal in a UK that seems to be so focused on big bang entrepreneurship and innovation that it forgets there’s a huge pool of self-employed people underpinning these efforts.