Rishi Sunak’s pared back Spring Statement contained only small crumbs of comfort for contractors and umbrella company workers.

A £3,000 increase in the threshold at which you start paying National Insurance (NI) contributions will help some low-earning employees. For many, however, this benefit will only slightly outweigh the simultaneous NI increase of 1.25%, and for some workers will only serve to reduce the loss.

For umbrella workers, we’ve calculated that the NI threshold increase will benefit workers earning up to £500 of applicable income per week. This equates to an annual salary of about £26,000.

After this, increases in employee and employer NI will outweigh any of the savings, though the impact of these contribution rises will obviously be lower than it would otherwise have been.  

The Chancellor’s speech also contained details of a 1p income tax cut, which will reduce the basic rate of income tax from 20% to 19% from 2024.

Contractors and umbrella workers who drive will also benefit from a 5% cut in fuel duty. But with fuel costs at record highs, this tax cut may not feel that significant.

Some experts thought that the Chancellor might use the Spring ‘mini-budget’ to extend stricter IR35 rules to smaller businesses. Mercifully for contractors, however, this was not the case.

Other commentators thought we might see more detail about how the government plans to regulate umbrella companies, but there was no mention of this in the Chancellor’s speech or the accompanying Treasury document.

The Spring Statement did have a commitment for extra funding for HMRC to help with compliance activities. While details were scant, this could have an impact on contractors and umbrella workers that aren’t fully compliant with tax laws.

Peter Langham, Director of Umbrella.co.uk said: “Contractors have taken a hammering in recent budget statements, but this one was quiet.

“There are some minor crumbs of comfort in the announcement on fuel duty, income tax and National Insurance, but cost of living increases are likely to dwarf any of these benefits.

“We’re disappointed not to see an announcement on umbrella regulation. It’s clear the current system is leaving some vulnerable workers exposed to fraudsters and bad umbrellas.”

For more information about our services for contractors and umbrella workers, speak to a member of our team. Call: 0800 121 6513.