We’re contractor accountants, so we like to stay up to date with the latest self-employment news – this includes the recent figures showing that freelance earnings and confidence have bounced back to pre-pandemic levels.
According to IPSE and PeoplePerHour, earnings have risen in the first quarter of 2021, signifying that the sector is on the up. With both the pandemic and Brexit impacting businesses across the UK, it’s fantastic to see the self-employed begin to feel the effect of an economic recovery.
What Has Changed?
The average earning for the first quarter of 2021 were 20% higher than the earnings reported at the end of last year. This is equivalent to a growth of £3,495.
However, the number of weeks that freelancers can have in-between jobs (average spare capacity), dropped from 4.3 weeks to 3.7 weeks, so this hasn’t yet recovered. Still, freelancers have worked hard to alleviate this burden, including raising their daily and hourly rates.
The study concluded that this was a major factor in the rise of these average earnings, and that the amount of work that self-employed people did during this time also contributed to the figures.
Confidence in the UK economy has grown, with freelancers feeling more optimistic about the near and far future. Andy Chamberlain, Director of Policy at IPSE, said that freelancers and contractors are finally “seeing cause to hope after a dark year” and that “the roadmap to opening up the UK has driven a remarkable recovery in freelancers’ earnings. Economic confidence among freelancers is now at its highest levels since before the EU referendum.”
Despite this, it’s also important to consider that many self-employed people don’t have a lot of confidence in the performance of their own business at the moment – this means that, while the economy is improving, this may not reflect individual cases.
The report remarks that this is the first time since 2014 that freelancers have had more confidence in the economy than in their own business.
Why This Lack of Confidence?
The main culprit for this appears to be the IR35 reform. The legislation, which we’ve written about in length, has impacted self-employed individuals in the private sector since the new tax year came into effect.
We wrote an article detailing how you can determine your IR35 status, so make sure to give it a read to learn more about the new changes to IR35 – and don’t hesitate to speak to us if you’d like more information or expert advice.
The report says that the latest IR35 reform impacts demand for self-employed individuals, as many businesses and companies may opt-out of working with freelancers and contractors. This is because the Agency or End Client are now responsible for determining the employment status of any self-employed person they engage with and may end up paying more taxes at the end of the day.
The CEST tool provided by HMRC is not as accurate as most would like either, leading to inconclusive results and uncertainty when it comes to the correct IR35 status determination.
Another reason for the lack of confidence is the way the government responded during the pandemic. The income support scheme has been criticised because many individuals could not get the help they needed, including self-employed mothers.
It’s been a difficult year for freelancers and contractors around the UK, but earnings are growing, and confidence in the economy is rising, despite concerns with IR35.
Xenios Thrasyvoulou, CEO of PeoplePerHour, said that “it’s incredibly encouraging to see that freelancers’ confidence in the economy is the highest it’s been for six years. This is a testament to the resilience of the freelance economy, and we hope to see this trend progress as the road out of lockdown continues.”
Freelancers and contractors are essential to the UK economy, considering there are around 5 million self-employed people contributing with taxes and National Insurance. So, many believe that the government should do everything it can to help them grow and succeed.
As sole trader accountants and limited company accountants, we can help manage your accounts and maximise your tax efficiency, so ring us on 0330 024 0406 to learn more about our services and what we can do for you.