Starting your own business shouldn’t feel like a battle against the Treasury: Vicks Rodwell

Every Budget now arrives like a lottery draw for the self-employed, with income tax, dividend tax and National Insurance thresholds all liable to move, often in ways that conveniently bypass anyone without an employer to share the burden with. Try building a five-year business plan when you can’t predict what you’ll be taxed on next April.

The tax-free dividend allowance has fallen from £5,000 in 2017 to just £500 today, removing one of the few genuine incentives to take on the risk of running your own company. The rise in Employer’s National Insurance also weakened business, investment decisions have been delayed and economic growth has remained stubbornly flat.

Then there are the basics which continue to become more complicated and expensive. Companies House fees, ID checks, insurance, accounting software, compliance costs, and now Making Tax Digital for sole traders. While none of it looks overly difficult in isolation, stack it up and it’s a real burden for a one-person operation with no finance department to absorb it.

IR35 made things worse still. Since the 2019 and 2021 reforms, large numbers of contractors were pushed onto client payrolls, losing the freedom of self-employment while gaining none of the protections that come with being an employee. Our own research suggests two in five directors have shut their companies down as a direct result. Fewer contractors mean a smaller pool of flexible, experienced talent for Yorkshire businesses to draw on, so projects take longer and cost more.

The real danger is that people simply stop trying. Every barrier added is a quiet signal to would-be entrepreneurs that it just isn’t worth the risk. That’s a loss of skill, ambition and drive the economy desperately needs.

Prime Minister Andy Burnham’s government has a genuine chance to change the tone. Greater clarity on employment status is essential if businesses and the self-employed are to have confidence in the rules governing modern working relationships.

Without it, the uncertainty that has fuelled so many of the problems associated with IR35 will simply persist. Publishing the long-promised employment status review should be an early priority.

A genuinely business-friendly government should resist the urge to keep pulling different tax levers and instead offer a stable, predictable framework that gives the self-employed confidence to plan ahead. We included these challenges within our representation submission to the Treasury ahead of the much-anticipated Budget to ensure the voice of the self-employed is heard from the very first policy conversations.

We’ll also keep using our seats on the Small Business Growth Forum and the Small Business Regulatory Taskforce to press for action.

Yorkshire’s self-employed have shown they can build businesses against the odds. It’s time the system stopped making that harder than it needs to be and fully supports the individuals government ministers often refer to as ‘the backbone of the economy’.

Vicks Rodwell is CEO of IPSE, the self-employed association