Top 5 Autumn Budget areas for IT contractors to tick off

As the first Labour Budget in 14 years looms in the shape of Autumn Budget 2024 this Wednesday, news reports are dominated by rumours about what the chancellor, Rachel Reeves, will announce.

From what we are hearing, there are core elements that contractors will no doubt be most concerned about, but also a few positive moves that could result in increased opportunities, writes Tania Bowers, a director at APSCo.

Invest 2035, the UK’s Industrial Strategy, has the potential to increase demand for contract expertise across advanced manufacturing, clean energy, defence, creative industries, financial services and life sciences, for example.

In the 2024 Autumn Budget full speech or in the ‘Green Book’ itself, however, here are the top five areas IT contractors should look out for:

1. Employer NICs increase

We’ve seen growing speculation that Labour will backtrack on its campaign promise not to increase National Insurance Contributions.

While this is more of a concern for employers than many individual contractors (although it might be passed on to umbrella company employees), it has the potential in the longer term to increase demand for contractors.

Our members are already beginning to report an uptick in the number of employers seeking to reduce employment costs longer-term, by relying instead on temporary resources to fill gaps and thereby pushing any subsequent increase in NICs contributions onto umbrella companies, recruiters and limited companies instead.

This could therefore be a promising move for contractors, but higher employer NICs might also have a short-term adverse impact on contractor assignment rates, in the event umbrellas pass the rate onto their staff.

2. Pensions tax relief raid

There has also been the suggestion that pensions tax relief for higher earners will be amended or even abolished.

For contractors who have been contributing higher sums into a pension pot, such a move could have a negative effect on access to funds and will certainly be unwelcome.

3. Capital Gains Tax hike and/or BADR abolition

The freeze on income tax thresholds is dominating the news agenda at the moment, but for contractors operating under a limited company the potential hike in CGT rates, and the possible abolition of the Business Asset Disposal Relief (BADR), is another potential announcement that could impact finances, particularly for those looking to liquidate assets in the near future.

4. Industrial strategy

The Government’s Industrial Strategy is a prime opportunity for contract professionals, with demand for technical skills across skills-short remits set to increase. A consultation has been launched but closes soon; November 24th.

At the moment there hasn’t been much new information beyond the intentions of the strategy which have been outlined in Green Paper, but it is hoped that Reeves will outline how the government plans to fund the strategy, ahead of further details in 2025.

More information about the 10-year plan for the economy might also help to repair Labour’s reputation with technologists, which was dealt a blow when the new government shelved a £1.3billion supercomputer package.

5. IR35 and tax regulation

It would certainly be welcome to see Off-Payroll regulations brought back under the microscope, but in reality, we are unlikely to see any changes to the IR35/OPW rules.

Instead, we’re expecting to see more enforcement activity from HMRC, and our organisation will certainly be looking out for related, potential changes around anti-avoidance measures, in addition to the consultation on E-invoicing for VAT that we already know is on the cards.

While such changes will be more likely to have an administrative impact on contractors, rather than a direct financial one, it is still a development to be mindful of.

We will also continue to push for clarity from officials on behalf of contractors and recruiters, particularly around the finer details related to Statement of Works.

Final thoughts

What is critical for the chancellor to consider in Wednesday’s Budget is the critical role that freelance IT contractors play in the UK economy, particularly given the continued shortage of technology and technical talent.

Those in the flexible workforce are uniquely positioned to be able to fill immediate gaps and help get the economy back on track, at a time when questions are being asked around the growing financial burden on businesses including from the newly published £5billion-a-year Employment Rights Bill.

However, currently, those in the highly skilled segment of the flexible workforce face over-regulation that limits their flexibility and -- should some of the above be unveiled -- are also set to be financially impaired by tax changes.

The tech contract labour market needs to be bolstered if other plans such as the Industrial Strategy are to be successfully delivered by the Sir Keir Starmer-led government. Placing greater financial burden on them will have the opposite impact.