"Freelancers are close to having nervous breakdowns and some are considering suicide over tax rule changes that have inadvertently left them struggling to make ends meet.
Almost a third of self-employed contractors are experiencing anxiety or suicidal thoughts due to the impact of the impending reforms coming into force in April, according to a study by tax firm InniAccounts.
Tax rules for off-payroll workers, also known as “IR35”, have been in place since 2000. Currently, contractors assess their own tax status, but April's reforms will shift this responsibility to businesses.
The regime change is designed to stop “disguised employees” gaming the system, working in a permanent position in a company without paying the same income tax or National Insurance as normal workers.
However, scores of innocent freelancers have been caught out, as large businesses have decided to stop working with contractors altogether, for fear of getting into a dispute with the tax authority.
It means many have been left out of work for months, or told they can only continue working if they are paid the same as everyone else, meaning higher taxes, less take-home pay and all without the benefits like sick pay and annual leave permanent staff enjoy.
Telegraph Money spoke to some of those struggling to cope. They asked for their full names to be withheld.
Ronald, 53, has been contracting for nine years as a software developer, working for banks, insurers and other financial institutions, but suddenly found himself out of work for five months after taking a two-week holiday last summer.
He said he was heading for a “mental breakdown” and was prescribed antidepressants by his GP to help him cope with his anxiety.
“I was crawling the walls at home. I feel useless if I’m not doing anything and I have never been out of work that long in my life,” he said.
He took on a new contract in November with a smaller firm, which does not have to comply with the new rules, although he has accepted a significant pay cut and now faces a two-hour commute.
“The bigger firms just aren’t hiring anymore. Being out of work has depleted my savings and now I am living pay cheque to pay cheque. If I can’t get back to earning close to what I was before, I will end up defaulting on my mortgage. I feel like my career is coming to an end,” he said.
Mark, aged 41, has worked freelance in cyber security for banks, insurers and in the public sector for six years, but has not been able to find any new work since December.
He said his doctor had prescribed him beta blockers for his stress, anxiety and panic attacks. He uses the text messaging charity service Shout for support when he feels lowest.
“I still cry a lot and have two young children to provide for. Unless businesses start changing their approach, I will have to go back to full-time employment,” he added.
Elise, 49, who has Asperger's syndrome, is also having to face the prospect of returning to working in an office full-time.
“Because of my condition, this would be impossible for me. I’d inevitably have to commute to London, where all the jobs are. This means big crowds, more social interaction and office politics, which I cannot deal with, and it’s a cause of huge anxiety.
“I’ve been a freelancer working in IT since 1999 and have been able to work from home and make a living in spite of the disorder,” she said.
She added that she has no work lined up for the new tax year and, with the only other option to return to full-time employment, she would either downsize and live off working smaller jobs or move to France to continue working there.
A spokesman for HM Revenue & Customs (HMRC) said it had policies in place to provide extra help with people finding dealing with their tax affairs stressful.
“The off-payroll reforms don’t stop people working through their own companies; they help ensure the right tax is paid. They ensure consistency in the administration of the off-payroll working rules across all sectors. We don’t want to penalise anyone, just help them get the tax right,” they said.
It follows HMRC’s controversial “loan charge”, which sought to recover back taxes for tax avoidance schemes once considered legal and promoted by respectable firms. Campaigners say as many as seven affected individuals facing thousands in disputed tax bills have taken their own lives over the policy.
The April IR35 changes are now the subject of a review by HM Treasury, looking at how to smooth the transition to the new system, which is expected to conclude at the end of the month. "
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