If you’re self-employed then you’ve probably looked at the political goings-on over the past couple of weeks wondering what might happen next. Working for yourself is hard enough as it is, and comes with some considerable worries and concerns, but when you add in the potential for higher National Insurance Contributions (NICs), lower dividend allowances and a potential Treasury taxation pursuit of those who use limited companies, then you would be forgiven for being slightly nervy about proceedings.
The increase in Class 4 NICs contributions has (at present) being consigned to a political graveyard – the result of pressure forced upon the Chancellor and the perception that it was breaking a manifesto commitment – but you can’t help get the feeling that this government will be reviewing the self-employed and the perceived taxation benefits they receive in the future. Certainly, all eyes and ears will be on the November Budget for further details here.
Without wading into political territory, it has seemed rather churlish to focus on the self-employed and to suggest one of the reasons why they’ve looked here for increased taxation revenue, is because of the growth in the numbers of those who are self-employed. Last time I looked at the figures, the increase in the number of self-employed people can effectively be put down to the Credit Crunch and subsequent recession, when large numbers of people felt they had no option but to go down this route, having lost employed status as a result of those huge economic changes.
Whatever the motivations, my own view is that ‘going self-employed’ is not a decision anyone takes lightly, and that it puts significant pressure on the individual themselves and their families. Plus of course it certainly does not come with certain other employed benefits like paid leave or statutory sick pay – regardless of the other perceived tax advantages, I think you can make a real case for the self-employed being entitled to those other ‘advantages’ because of the risk they are taking. I know many others will disagree however.
In a mortgage sense of course, being self-employed in recent years – again going back to the credit crunch – has hardly been an advantage when it comes to securing a home loan. Certainly, the mortgage options available to the self-employed are not exactly plentiful, although more lenders have been working in this territory over the last couple of years. That ability to find a mortgage, to meet the affordability requirements, to deliver on the need for X number of year’s accounts, etc, can be stressful in its own right and again, in this area, there doesn’t appear to be major advantages for the self-employed.
Recent research by Aldermore on this very issue highlights the perception of the self-employed person’s position within the mortgage market. Three in five of those quizzed said they would never be able to buy a home – many believe this is because of the difficulty in raising a deposit but 14% put this down to their ability to secure a mortgage, while a somewhat shocking statistic is that close to one-third (32%) said they’d had to give up being self-employed in order to get a mortgage.
One wonders how many self-employed people looking at the shenanigans of the last couple of weeks may be considering the same thing? Ultimately, one hopes that the focus on self-employed people, the growing numbers, their mortgage needs, etc, brings more providers into the marketplace and that we can have product growth and a commitment to supporting the many millions who work in this manner. We often pride ourselves on the ability of our mortgage market to deliver what individual borrowers need and, for perhaps too long, we perhaps haven’t worked hard enough to offer up the right loans to the self-employed. Their importance to the UK economy cannot be underestimated and it’s vital that we have a mortgage market fit for their purpose.
Pad Bamford is business development director at AmTrust Mortgage Insurance