What will Brexit mean for self-employed business owners?
We may be out by the end of October so you need to start preparing now.
Boris Johnson has won the battle to be leader of the Conservatives and the new Prime Minister of the United Kingdom. Many people hope this could finally break the logjam in Parliament and find some sort of way forward on Brexit.
Given that the leader is Boris Johnson, it seems more likely than ever that Brexit will take place and will happen soon. So what will that mean for self-employed business owners?
After three years of discussion and not a lot of action there’s undoubtedly a fair amount of anxiety among small and medium-sized enterprises (SMEs).
Coconut surveyed 600 self-employed business owners, and found that 40% said they believe Brexit will have a negative effect on their finances.
What’s more, 31% said Brexit will have a negative effect on their overall business.
Of course, Brexit planning and readiness has been a well-publicised issue for some of the UK’s larger businesses. That’s because they can advocate loudly for themselves or have big industry representatives to do so for them.
They also have the capacity to prepare, something that many smaller businesses can struggle with.
Sam O’Connor, CEO of Coconut, says he’s worried about self-employed businesses in particular.
“Our customers are the 5m owner-managed businesses which have been left out in the cold by the banks and current cloud-accounting software,” he explains.
“The uncertainty created around Brexit creates a lot of pain for our customers. A real challenge if you’re a one-person operation is that you don’t necessarily have the resources you need to plan effectively for Brexit.”
However, there is a lot that self-employed business owners can do to ready themselves for whatever happens in the next three months – and indeed over the next few years as Brexit plays out.
Partly they need to prepare for any disruption but they also need to be ready for the possible bounce in business opportunity that many Brexit supporters believe will follow the UK’s exit from the European Union.
So what will Brexit mean the self-employed business owners and what can you do to prepare?
What’s going to happen?
No one can tell you that, sorry. You may as well ask a magic 8 ball (I have, if you’re interested. It said ‘ask again later’).
But you can look at the most likely outcomes and make plans accordingly.
The new Prime Minister is adamant that the UK will leave at the end of October and that is certainly the legal position, barring a negotiated extension.
Johnson has said he wants to negotiate a deal but that the UK will leave on that date regardless, raising the prospect of no deal.
The Office for Budget Responsibility has said that leaving without a deal would risk a year-long downturn, shrinking the economy by 2%, dropping house prices by around 10% and increasing unemployment to more than 5%.
However, pro-Brexit campaigners point out that there were predictions of a recession and high unemployment even following a leave win in the referendum and that did not happen.
What will it mean for the self-employed?
IPSE, the association for independent professionals and the self-employed, has said that the self-employed often feel the impact of economic changes first, as businesses can so easily issue or terminate their contracts.
If you routinely work in Europe then you may need to apply for a visa following a no-deal outcome unless a contingency plan is put in place. The EU has made plans for visa-free 90-day travel, however, so it wouldn’t be an instant cut off.
It’s not all bad, of course. If the value of the pound did fall then any self-employed business owners based in the UK but contracted to an EU company would in effect be paid more. However, they may be less likely to secure such contracts in the future as its unclear what impact Brexit will have on the perception of the UK based freelancers, and whether this will impact their competitiveness with other markets around the world.
So here are some things to consider.
Taking steps to be ready no matter what could be essential for those who want to survive and thrive in the coming months and years.
Register for an Economic Operator and Registration Identification Number (EORI)
The tax office has recommended that businesses and self-employed people who currently trade with the EU and want to continue doing so should register for an EORI as soon as possible.
You won’t need one if you’re a UK-specific business and if you have clients outside the EU then you will already have one. But if you think you’ll need one then act fast.
It’s free, it takes just a few minutes to apply but it takes up to three days to process and then there’s a further 48 hours before you can use it to make declarations using the Customs Handling and Export Freight system.
The government warns this could take longer if there are high volumes of applications so get it sorted now – learn more and apply through this government website.
Read the guidance
Many business owners and self-employed people have expressed frustration at three years of uncertainty since the referendum but there is some help and guidance available.
The government has issued a number of guides and other documents, covering everything from accessing animal medicine and IT systems to workplace rights if there’s no Brexit deal.
You can search the information to find what you need specifically here, and sign up to get email alerts when new guidance is published.
Get your accounts sorted
The more you can do to get your business admin and accounts sorted, the better prepared you will be for anything the coming months throw at you.
Get on top of your payments and obligations now so you have a really clear idea of what kind of state your finances are in.
Don’t lose sight of other challenges
While Brexit planning occupies a lot of the bandwidth, there’s a real risk that other important issues may get forgotten about.
But those other issues don’t go away just because Brexit requires a lot of planning.
Our research also found that 26% of self-employed business owners said they can’t think about Making Tax Digital (MTD) with Brexit looming.
From 1st April 2019, if you are VAT-registered and your turnover is above £85,000, HMRC requires you to keep bookkeeping records digitally, and to submit them through a MTD-ready system like Coconut.
There’s more on the horizon of course – HMRC also plans to mandate digital record keeping and submission for self-assessment and corporation tax, but this won’t be until at least 2021.
Brexit may be orderly and positive for British business. It may be disruptive. It’s possible it may even be delayed.
There is one certainty though – failing to prepare for other challenges like MTD will create risk for freelancers and businesses, whether they are small, medium or large.
No-deal may be more likely than it was but it isn’t the new Prime Minister’s ideal outcome and there’s some evidence Parliament would block it.
If the UK leaves with a deal then it will enter a transition period that is likely to last until the end of next year at least – meaning there’s a good chance that nothing will change dramatically for some time.
Don’t panic but do prepare! Coconut has been created with self-employed business owners in mind so if you need help getting your accounts in order, take a look and see if it could be a good fit for you and your business.