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FS1 is a Milton Keynes based independent recruitment agency specialising within the Marketing, Creative, and Commercial Sectors


Posted: 25/08/2015

Here at FS1 we work with a number of freelancers across the marketing and creative sectors; some are new to the game, looking for work whilst search for something long term, others enjoy the flexibility and variety of freelance and have worked on this basis for many years. And how they go about paying tax varies too – whether it be PAYE, umbrella companies or LTD companies, everyone has their own preference. However, with changes up and coming following the latest government Budget, freelancers may want to consider how these changes may affect them.

In his last budget announcement before the election, the Chancellor George Osbourne said: “…we will stop employment intermediaries exploiting the tax system to reduce their own costs by clamping down on the agencies and umbrella companies who abuse tax reliefs on travel and subsistence – while we protect those genuinely self-employed.” After the election, in his summer budget, the Chancellor made it clear the government would continue with these plans, stating: “We’re consulting today on how to deal with the increasing abuse of the rules around disguised employment when working through a personal service company.”

In short, freelancers currently operating under an umbrella company or LTD company working under the direction of a “manager” in a company can currently claim tax reliefs on travel and subsistence; from April 2016, this will no longer be the case. Companies using freelancers still operating after this time via umbrella or LTD companies will face frequent questions from the HMRC on why this is the case and why PAYE was not a viable option.

Jon Norris, editor of the Freelance Advisor blog, said it is unlikely that freelancers using an umbrella company will have a clear picture of where they stand until the guidance is finalised.

On the plus side, there's evidence the government is listening to concerned contractors. The Freelancer and Contractor Services Association’s (FCSA) chief executive Julia Kermode is satisfied, stating: “We were worried that the rules would simply be changed and we are very pleased that HMRC and HM Treasury have listened to our lobbying, and appreciate the value of our sector.” She also noted that the Chancellors speech stated the intent to protect those who are genuinely self employed whilst cracking down on those who exploit the system.

For some, freelance is a way of life, and these changes may lead freelancers to seriously reconsider how best to continue with the flexibility of freelance. What are your thoughts?"