Budget 2021: Contractors will 'watch through their hands' on March 3rd

Contractors will watch Budget 2021 “through their hands” when chancellor Rishi Sunak delivers it on March 3rd.

Issuing this grim prediction after HM Treasury officially set the date, Lucy Smith at Clarity Umbrella was referring to the tradition of chancellors targeting the contractor workforce.

But she also said that this Budget, which is only Mr Sunak’s second despite Budget-style measures in both his Spending Review and Summer Economic Statement, will be more “interesting,” because of the hefty coronavirus-led deficit that he needs to address.  

'Balancing the books'

And it is the pandemic’s huge economic impact that makes other contracting experts believe that the chancellor will not postpone Budget 2021, or cancel it like he was forced to last year.

In fact, contractors’ advisers say Mr Sunak will stick to Wednesday March 3rd even in the face of fresh pressures and mounting uncertainty from both Brexit and coronavirus.

“With no Budget last year, it’s fairly obvious that the government [now] needs to…begin to explain its plan for balancing the UK’s books,” warns contractor accountant Helen Christopher.  

“It’s tempting to think that with the uncertainty as to when the covid vaccine and restrictions will bring the virus back under control, the Budget will once again be scrapped, or postponed.

“But I don’t think the chancellor can just continue to borrow”, she said, “without beginning to set out plans for recovery and repayment of borrowings.”

'Less likely to be postponed'

Qdos Contractor agrees. “The chancellor will want to start balancing the books, having spent some £400billion on coronavirus support measures,” the advisory’s Seb Maley said last night.

“[So postponing the Budget beyond March 3rd] seems less likely to happen, given the government will probably want to announce tax reforms that reduce the deficit.”

Chiming with the beliefs of both experts, HM Treasury says Mr Sunak will use Budget 2021 to “set out the next phase of the plan to tackle the virus and protect jobs”.

Individual contractors are among those who can now go online to tell HMT officials what the March 3rd package should contain.

The deadline to comment on existing policy or suggest a new policy is 1700 on January 14th.

'Urgently implement DISS'

But Forgotten Ltd says the new policy which the chancellor should unveil is already obvious.

“[MPs] need to support the Directors' Income Support Scheme [proposal] and encourage Rishi Sunak to implement [it] urgently,” posted the lobby group, adding.

“The Treasury has said many times that it doesn’t have the time (or appetite) to create an entirely new scheme for small, limited company directors. So the DISS closely follows the structure of the [existing] Self-Employed Income Support Scheme.”

But the initial HMT announcement of a Budget in eight weeks’ time lacks the usual tax policy-making focus, according to Ms Christopher, operations director at Orange Genie.

“It’s billed as opportunity for the government to set out the next phase of the plan to tackle coronavirus -- with no explicit mention of the usual budgetary commentary and tax changes."

'A different Budget to previous Budgets'

She continued: “So I do think Budget 2021 will be different to those we have seen before.

"Our current level of borrowing is not sustainable in the long term and the chancellor needs to demonstrate a plan to start repaying this in the future, alongside trying to support an economy that potentially is still spiralling downwards.”

Ominously, the accountant believes that tax increases to pay for covid-19 income support schemes will be seen by the chancellor as a necessity on March 3rd.

'Chancellor needs to be brutal'

But contractors say they have had hardly any support since the pandemic began in the first quarter of last year.

“This Budget needs to be clear,” said one, “brutal on tax avoidance, brutal on people who have rinsed the system in 2020….[but without] tax increases at all for the three million who have had no support in 2020.”

Qdos’ Mr Maley echoed: “We are nowhere near through the [covid-19] crisis, which begs the question -- is announcing a raft of incoming tax increases as early as March the right thing to do?

“Certainly, the millions of freelancers and contractors who have fallen through the gaps of the support do not deserve to be hit with tax hikes to repay the government for financial aid they never received.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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