Where next for Bristol’s gig economy?

The government’s U-turn today on national insurance rises announced last week will no doubt go down well with the business community. Much has been made of the impact on self-employed workers and their families, particularly around London.

But while London might be home to the black cab driver and the Pimlico plumber, Bristol isn’t far behind in the gig economy standings.

App-based work has exploded onto the Bristol labour market in the form of Uber and Deliveroo, but the self-employment scene has always been strong in a city that boasts a big construction industry, vibrant arts culture and booming freelance community.

So what questions do Bristolians have about the future of the gig economy? Our employment law solicitors answer some of them here.

How is National Insurance changing?

First, the good news. Class 2 national insurance contributions – a flat yearly £146 charge on the self-employed – are set to being abolished, so if you’re a part-time Deliveroo rider or Uber cabbie earning over £5,600 a year, you could save on your tax bill.

Previously, the plan was to offset this by a rise in self-employed percentage contributions – from 9% of your income to 10% next year, and 11% the year after. However, today the government announced it was ditching the planned increase to avoid breaking an election promise. Overall then, a national insurance rise has turned into a national insurance cut for those paying it out of their self-employed income.

How would the rise have affected my gig?

Overall, a self-employed worker wouldn’t have paid a penny more in national insurance until they earned over £15,412 a year.

For example, as a Deliveroo rider making £3.75-£4.25 a delivery, your average earnings are unlikely to exceed £9 an hour, even if you’re pelting it down Park Street on a regular basis. You would have had to work about 35 hours a week before you started to notice a difference in national insurance under the ditched changes.

How might the national insurance rise affect the construction industry?

The sector where the rise would have hit hardest is the construction industry. Indeed, it’s this sector’s propensity for self-employed contractors over ‘regular’ employees that drove the government to look again at national insurance.

Most construction workers are self-employed, usually as sole traders, and they’ll be contracted out by development companies to work on builds. The 2% rise could have hit a brick layer on £25,000 for almost £200 more in national insurance by 2020 than they paid in 2016. An electrician on £40,000 would have paid £500 more.

Who else has escaped a bigger tax bill?

Bristol also has thriving arts, sport and leisure industries in which many people are self-employed sole traders. Then there are the usual self-employed professions that you find in every town or city – hairdressers, therapists, mechanics, handymen, delivery drivers and shop owners.

And yes, even some lawyers could have been affected!

So where next?

The government has only said it will rule out the proposed changes during the life of this parliament. That means a national insurance rise could be on the cards in 2020.

It may be that such changes to national insurance mean Bristol’s self-employed need to look again at how they structure their affairs.

For example, you might be a sole trader now, but it could be worth creating a limited company to run your business through in the future, so that you have the option to take some profits as a dividend rather than as salary.

The interesting point about the proposed changes is that they show the government is serious about taxing the gig economy more. They tried to go for the self-employed this time, but look out for proposals that will seek to tax companies using self-employed workers rather than employees in the future.

This could mean that some companies using self-employed labour opt to shift to employment contracts for workers. Uber could be forced down this route after a recent court ruling.

Or it could mean that companies just pay their contractors less. Watch this space.

Further information

For further information about self-employment, company law and contracts, or to speak to a specialist employment solicitor in Bristol, call us on 0117 325 2929 or complete our online enquiry form.