The impact of the Spring Budget 2024 on contractors 

The recent Spring Budget announcement by Chancellor Jeremy Hunt serves as a pivotal moment for contractors throughout the UK.  

As the General Election looms and economic pressures intensify, contractors are eager to comprehend the budget’s ramifications on their businesses and livelihoods.  

In this analysis, Sarah Ellis, Astute’s Operations Director, delves into the key highlights of the Spring budget and scrutinise its implications for the contractor community. 

Key spring budget highlights 

National Insurance Contributions (NICs) reduction  

The Chancellor unveiled a substantial reduction in NICs rates, slashing the main rate of Class 1 employee NICs from 10% to 8%, effective from 6th April 2024.  

Additionally, the main rate of Class 4 self-employed NICs will be reduced from 9% to 6%.  

This move is poised to provide much-needed relief for sole traders and umbrella company workers, potentially alleviating their tax burden and bolstering disposable income. 

VAT registration threshold increase 

Another noteworthy announcement entails the elevation of the VAT registration threshold from £85,000 to £90,000, set to take effect from 1 April 2024.  

This adjustment aims to benefit small businesses, empowering them to invest and expand without the encumbrance of VAT registration.  

With more than 28,000 businesses expected to benefit from this threshold increase, it has the potential to invigorate entrepreneurship and stimulate economic activity. 

Investment in digital services and infrastructure 

The Spring budget allocates provisions for investment in HMRC’s digital services, streamlining tax processes for Income Tax Self Assessment taxpayers seeking to pay tax in instalments from September 2025.  

Moreover, plans are underway to modernise IT systems within the NHS, with a substantial investment of £3.4 billion earmarked to bolster digital transformation initiatives.  

This investment is anticipated to spawn numerous permanent and flexible nonclinical roles, presenting lucrative opportunities for contractors proficient in technology and AI. 

Contractor community response 

Andy Chamberlain, Director of Policy at IPSE, said, “The reduction in NICs rates is an encouraging sign that the Chancellor is beginning to listen to the self-employed.”  

However, he added, “The measures failed to address the substantive issues holding the self-employed back,” highlighted concerns such as IR35 and the looming impact of Making Tax Digital. 

Tania Bowers, Global Public Policy Director at APSCo, said, “We fear an over reliance on consultancies, which are generally far more expensive overall than the use of skilled flexible contractors through recruitment businesses.  

“The highly skilled contract workforce requires less protection and more freedom than others employed under different contracts.

“That’s why we believe highly skilled workers need to be excluded from the Agency Workers Regulations.” 

The Spring Budget 2024 presents a mixed bag of opportunities and challenges for contractors.  

While the reduction in NICs rates and the increase in the VAT registration threshold offer some relief, there are lingering concerns regarding regulatory issues and skill shortages. 

Contractors must stay informed and adapt to the evolving economic landscape, leveraging available opportunities while advocating for policies that support their interests and foster long-term growth and sustainability. 

As the contracting community navigates the implications of the Spring budget, proactive engagement and collaboration will be essential to driving positive outcomes and securing a prosperous future for contractors across the UK. 

About the author

Sarah joined Astute back in September 2007; originally as a Recruitment Consultant, she then progressed to HR Manager and is now Astute’s Operations Director.

Sarah spends her days reviewing contractual terms, banking relationships, supplier reviews, ISO certification and compliance across the business.

With an impeccable memory, Sarah is the go-to-person for anything that has happened in the last ten years!

If you enjoyed reading Sarah’s thoughts on the Spring Budget, connect with her on LinkedIn.