With the Labour Party’s recent victory in the July General Election, to gauge what the future might hold the industry is speculating on what the Government’s promises mean for contractors, particularly those concerning taxation and employment.
Labour Chancellor Rachel Reeves wasted no time addressing the state of the nation’s finances in her statement to the House of Commons on 29th July. Alongside a comprehensive review of government expenditures, the Labour government also outlined plans to avoid future budgetary surprises.
Labour’s ‘Make Work Pay’ plan
Labour’s has placed emphasis on reforming the workplace, with a commitment to the ‘Plan to Make Work Pay’ by 4th October 2024. The King’s Speech on 17th July introduced some components of this plan through the Employment Rights Bill. The bill, focuses on employee rights and employer responsibilities and contains multiple provisions relevant to contractors:
- Abolishing zero-hours contracts – while many contractors value flexible working hours, the implications of this change are yet to be fully understood.
- Review of worker status – Labour aims to simplify employment classifications by moving towards a single worker status, while retaining self-employment. This will likely take time to implement.
- Creation of a genuine living wage – adjustments to the Low Pay Commission’s remit will ensure that the cost of living is better reflected in wage rates, with travel time between sites also being compensated.
- Addressing false self-employment – Labour has pledged to tackle false self-employment while also strengthening protections for genuine self-employed individuals. We’re still waiting for the specifics on these measures.
Other Labour plans
- Apprenticeship Levy – recognising the problems with the current system, Labour intends to reform the Apprenticeship Levy to achieve better outcomes.
- Pension Schemes bill – the aim of which being to enhance the performance of private pension schemes by focusing on value for money.
Tackling Tax Avoidance
Labour has also pledged to increase funding for HMRC to combat tax avoidance and evasion, particularly through investment in data collection and AI.
The ongoing review of ‘Tackling Non-Compliance in the Umbrella Marketplace’ is also likely to conclude by early 2025. Given Labour’s history of regulation, enhanced measures, including a formal registration system for umbrella companies, could be on the horizon. IR35 enforcement and scrutiny under the agency workers’ tax regime are also likely to continue. If Labour follows through on its promises to crack down on tax avoidance schemes, we may finally see the end of the rotten apples that have hurt the sector’s reputation.
Related article: Our predictions for the first Labour Budget
The Chancellor has already hinted in her recent statement some of the things that may be included in the upcoming budget alongside some things we can predict.
Our predictions for the upcoming Labour Budget >