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Due to Pandemic and IR35 reform – half of UK freelancers plan to quit self-employment

Now a year on from the first lockdown, it has been revealed that according to data from The Association of Independent Professionals and the Self-Employed (IPSE), half of freelancers plan to quit self-employment for good.

The Covid-19 pandemic, combined with the upcoming IR35 reform next month has resulted in many self-employed workers now planning to either seek work abroad, return to the security of full time employment or to retire within a year.

Since the pandemic began a year ago many self-employed have already quit, with the number of self-employed workers dropping from 5 million a year ago to 4.3 million currently, reversing a decade long upward trend. These statistics are clearly not surprising given how the pandemic has affected the self-employed.

Freelancers average earnings are 30% lower than they were before the pandemic, with the pandemic being the main source of hardship, however the IR35 reform is also a contributing factor. According to the IPSE, many contractors have reported having contracts cancelled, as businesses do not want to deal with the new IR35 changes.  Many self-employed individuals have now been told that they can only work if they become de facto payroll employees, which means less take home money for them as they pay more taxes without benefitting from the rights employees enjoy such as sick pay and company pension schemes.

IR35 reform

The IR35 reform is intended to make sure that individuals working like employees, but who instead work through an intermediary (such as a limited company) pay the same income tax and National Insurance Contributions as an employee. It is seen to be unfair that currently two workers, performing the same tasks at the same company, are paying different rates of income tax and national insurance when their working arrangements are the same.

Now private sector businesses will become responsible for determining the employment status for contractors, regardless of whether they supply their services through a personal service company directly to their end user or via an agency.

Freelancing and contracting in the newly remote world

It isn’t all doom and gloom for the self-employed however. It is often a lot harder to get a full time job in a role and company you want to work for, during an economic crisis, than find a freelancing role. Being a freelancer or contractor can give you the freedom and flexibility to land a job quickly, as well as being beneficial for your career as you are able to consistently learn new skills and learn quickly how to provide value to the companies you work with.

For organisations, employing contractors in periods of economic uncertainty is often beneficial. Being able to only bring in freelancers during peak times you can maintain your employee head count year round while bringing in extra staff during busy periods without the commitment of employing these staff full time.  We have discussed in a previous blog post how contractors are a solution for a faster economic recovery

If you would like further information about how we could assist you and your company regarding working with contractors, then please contact us via com or send us a message via our contact page. We would be delighted to speak to you regarding the possibilities.

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