How Brexit Will Affect Self-Employment
How Brexit Will Affect Self-Employment
Many of the self-employed workers are employed in sectors such as tech and finance — two industries that could potentially see a drain in people and investment if the UK’s economy takes a nosedive in the wake of the country leaving the EU. Interestingly, 63 percent of the UK’s five million who call themselves self-employed think that Brexit won’t directly impact their business.
However, the self-employed contribute almost £300 billion a year to the UK economy and will be hugely affected by Brexit.
The UK government has focused mainly on securing the free-flowing provision of goods once the UK leaves the EU, consulting large companies in traditional industries with complex supply chains. However, the self-employed and freelancers have not been at the forefront of negotiations or media discussions — despite their growing importance to the UK economy.
IPSE has undertaken research that has shown that the self-employed want a non-disruptive Brexit, which includes access to the single market and customs union, and freedom of movement for people. We’ve highlighted below some of the issues the self-employed might face post-Brexit, and what can be done to mitigate some of the negative consequences.
World Trade Organisation (WTO) tariffs.
If the UK leaves the EU without a deal, this means that the buying and selling of goods and services could become more expensive, due to the addition of WTO tariffs. Ultimately, this means that for those self-employed having some form of trade with the EU, this could make the provision of their services less competitive than those based on the continent.
Even if your client isn’t based in the EU, they might be EU-owned but based in the UK, and export your services to another EU nation. Before the EU referendum, the Treasury undertook research and modeling which suggested that the addition of WTO tariffs would result in unemployment increasing to 820,000.
How to prepare: If you’re concerned about a no-deal Brexit, research whether the goods or services you or your clients provide would be subject to WTO tariffs, and how this would impact your work.
Regulations.
The Prime Minister indicated in January 2017 that the UK will be leaving the EU single market. Currently, 60% of UK legislation comes from the EU and allows the ease of trade across industries from chemicals to data and finance. Ultimately, Brexit means that companies based in the UK who trade with the EU will potentially have to grapple with two different sets of regulations.
These regulations could have significant implications for the self-employed. The government has published technical guides, which outline its plan for lots of different regulations.
How to prepare: If you work with regulations that are derived from EU law, it’s recommended that you check on the government website and see what you will need to do to comply with UK legislation post-Brexit.
Employment and tax.
Tax and employment regulations are mostly an issue for national governments. However, the UK pays into the EU’s contributory benefits system for pensions and sickness. If the UK leaves the EU with no deal, those self-employed in the UK who are EU citizens may have to pay two sets of national insurance. Right now, EU citizens have the right to live and work in the UK. The UK government has assured EU workers that they will retain these rights post-Brexit, but there could be requirements in the future for work visas or sponsorship.
In the event of a no-deal Brexit, the UK may change legislation in this area long term, and diverge from the other EU member states. Also, other areas of taxation might be indirectly affected, such as the UK lowering corporation tax. If you are an EU citizen, check with your home country and the status of social security contributions when living in a non-EU country.
VAT exemption thresholds could also change, regardless of whether or not there is a deal with the EU. At the moment, the UK has a VAT exemption at £85,000. However, leaving the single market could mean that the exemption drops to £76,000. This additional cost could cause thousands of SMEs (Europeans define this acronym as a small and medium-sized business enterprise). Meaning, the self-employed my have to add VAT to their services and products. If you are near the lower threshold, you will be legally required to charge VAT.
How to prepare: Check your annual numbers and revenue with your accountant, in order to be able to quantify the loss if the worst-case scenario comes true and the threshold changes post-Brexit. Then, using the scenario planning approach, prepare a plan with the expected income and outcome of the upcoming year, in order to see how it will affect your quality of living.
Freedom of movement.
Skilled and unskilled workers in the EU 28 have benefited from freedom of movement, one of the key pillars of the EU. The freedom to move and work where a person chooses has proved a controversial aspect of the EU referendum, and Prime Minister Theresa May has confirmed that after Brexit, this will end. Having a freelancers dream marketplace has enabled a market of 28 countries for the self-employed, having equal access to work in all these nations.
Tourist travel will still probably be straightforward, but businesses have expressed concern about moving their workers around the continent with ease. The self-employed could face challenges post-Brexit if they have clients based in the other 27 countries. A work visa may be needed, or possibly sponsorship. These processes could be expensive and cumbersome for clients, making self-employed contractors and freelancers based in the UK less appealing to work with than under current conditions.
Under a no-deal Brexit, all UK passport-holders must have a passport valid for six months or over if they are entering the EU. EU freelancers based in the UK must apply through the EU Settlement Scheme to remain in the UK beyond June 2021.
How to prepare: If you have clients based in the EU or who would require you to travel to the EU, check what plans they have in place to allow for self-employed contractors or their employees to move between the UK and the EU.
With uncertainty, comes opportunity.
If a no-deal Brexit does go ahead, it’s been predicted that specific industries will face chaos. Organizations will need to deal with prolonged uncertainty and adapt quickly to change. Companies might bring in more temporary workers to help manage their workload.
Moreover, for self-employed consultants and contracts in specific industries, Brexit-related jobs have increased. A study has shown that the financial services industry has created nearly 3,000 jobs in the EU because of Brexit, and 500 of these jobs are in London.
Another opportunity that could come from Brexit is the renegotiation of trade deals with countries outside of the EU. As a member of the EU, Britain is unable to have an independent seat at the WTO; this will no longer be the case once terms with the EU have been agreed upon. It will remain to be seen whether Britain could provide a higher level of freedom for the self-employed and could present an opportunity to work closely with major economies such as Japan, India and the UAE.
Brexit has created a lot of uncertainty, but there might be more opportunities for the self-employed. Look out for the opportunities that present themselves; your flexibility means you can gain a step ahead of your larger competitors. Indeed, if your smaller competitors are not as prepared as you for the upcoming changes, then you can also get a headstart on them.
How to prepare: Ask your clients if they have any Brexit-related roles, or if they foresee a requirement post-Brexit for temporary workers. Some companies might be seeking experts on customs procedures and trade, two areas which will drastically change.
The future of the self-employed.
Business does not like uncertainty – regardless of company size or industry, whether you’re self-employed or part of a multinational corporation. The media have zoned in on the adverse effects Brexit will have on large businesses, with little coverage given to the self-employed.
Use your flexibility to your advantage, bring in skilled freelancers if you need to enable your business offering to become more diverse. Look out for opportunities that you feel could be relevant to your clients. If you don’t currently have the people in your business to deliver the business that you are requiring — use your freelancers is a simple way of bridging that gap in the short term.
If you think that these services will be useful for your clients long term, then you can look to bring in someone on a permanent basis in the future. The UK is home to many companies across the world, who use the country as their European hub.
Many have indicated that if the UK does not secure a favorable deal with the EU, then they will move their operations elsewhere. The lack of regulatory equivalence, WTO tariffs, barriers to moving people and more, makes the UK a less attractive place to do business.
However, this might be a chance to hone in on your skills and an opportunity to expand your client base. Is it possible that Brexit will create jobs with your expertise? Will there suddenly be a demand for your products or services? These are just some of the questions you should ask when building a long term strategy around Brexit.
If you prepare as best you can to suit your business, the adverse effects of Brexit could be limited.
PeoplePerHour, the leading freelance marketplace in the UK, has released a dedicated microsite with series of Brexit guides for freelancers and small-business owners. Additionally, you may find other useful Brexit resources and news that will help you stay on top of the topic and get properly prepared.
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