“You are asking me to take decisions for five years down the line now and I am not going to do that. What I want to see is a rebalanced and fairer tax system. That is what I think is most important.”

Plans have already been made to reduce the tax paid by lower earners, by gradually increasing the personal allowance to £10,000. This will encourage people on low wages to get back into work, by increasing their net pay. High earners will not see any tax cuts until 2015.

Alexander has also made it clear that the coalition government intends to re-balance the tax system, and the revenue gained from increased taxes will help to reduce the public deficit. This has come after accusations that the Liberal Democrats had signed up to policies that impact upon the poor much harder than the high earners.

Umbrella company contractors will be able to take advantage of higher personal allowances when the revised rate of £7475 is introduced in April 2011. As there were many changes announced in the Budget 2010, it is advisable to seek advice from a reputable umbrella company who will maximise your income legitimately.

The report carried out by Synovate and KPMG revealed that the retail sector may not suffer excessively, especially as Christmas and the New Year will introduce sales and promotions, which is when sales traditionally see a boost. It may be a different story after the start of the New Year, as increased VAT has to be absorbed either by the retailer or passed on to the customer by raising prices.

The VAT increase itself will probably not inflict too much damage, but if interest rates rise in conjunction with the rate of inflation, the economy could be seriously affected. The government is forecasting that inflation will be low and the UK will be in recovery by January 2011.

The whole country, including umbrella company contractors, is waiting to see just what will happen to the economy, with so many changes in a short period of time. Changes to regulations such as IR35 legislation are desired to bring about positive improvements for contractors, whilst the higher rates of tax for earners look as though they will remain unchanged.

“Never before has proper guidance and support been so crucial in helping young people identify where the jobs of tomorrow are going to be, so that they can start planning their future education and training in areas where there are recognised skills shortages or in evolving markets.”

Feedback given to REC from professional recruiters has highlighted that students should take any kind of work, including voluntary work or charity work to show prospective employers that they have taken all necessary steps to gain the experience required by recruiters. The REC also recommends apprenticeships, work experience or internships as ways to gain valuable experience.

This can only happen with the support of education providers, businesses and recruiters working together with the government to create opportunities for young people, who are the future for the economy.

For young people who are setting out as freelancers, an umbrella company will remove the burden of administration while they concentrate on learning valuable skills. An umbrella company will also offer advice regarding regulations such as IR35 legislation, to avoid falling foul of HM Revenue & Customs

Chief Executive of PeoplePerHour.com, Xenios Thrasyvoulou said:

“The last decade has seen a boom in remote freelance working, facilitated by the Internet. This has been led by the IT industry, which lends itself to freelancing.”

For many SMEs freelancers, including umbrella company freelancers, provide a cost effective solution to the IT requirements of a company that employs fewer than 250 people. To set up an in-house IT solution would be a large investment of valuable resources. Freelancers provide services as and when they are required, without the need for the burden of administration.

This survey shows that IT freelancers are in demand, in particular for skills in Joomla, Wordpress, iPhone Apps, PHP, SEO and more. For freelancers who also want to work without the burden of administration restricting their time, an umbrella company will source work as well as maximising pay. A reputable umbrella company will deduct legitimate expenses for travel and subsistence as well as deducting tax and national insurance at source.

As freelancers are an economical alternative to permanent staff, they will continue to be in demand, especially as the public sector is making spending cuts, which is when freelancers may be an effective recruitment measure.

The REC views this extension as a reflection of the scheme’s success, with information and support provided by members to professionals who are seeking employment. Many of the job seekers had been made redundant thanks to cutbacks in the private sector. As the public sector is suffering huge cuts, with many job losses expected, the support offered by Jobsearch will be invaluable to professionals and executives looking to return to work.

Director of External Relations for REC, Tom Hadley said:

“Though the scheme will be operated at a reduced rate to reflect the current economic circumstances, it is extremely positive news for us that Ministers have recognised the value of Jobsearch and the valuable contribution that private recruitment professionals play in the overall employment landscape.”

The REC intends to continue to build relations and links with Ministers and the Department for Work and pensions, forging a partnership to get people back into work.

It is thought that freelancers, including umbrella company contractors, will play an instrumental role in rebuilding the private sector in preparation for the cuts and resulting job losses from the public sector. An umbrella company will help contractors to source work as well as take care of administration.

The results of the annual survey have shown that 1.2 million individuals aged 55 or over and still in work have not made financial plans for their retirement, although men are more likely than women to feel they are prepared. Only 15 percent of the people surveyed have taken advice from a professional regarding retirement, whilst 8 percent have approached their bank.

The majority of people are hoping to work beyond the statutory retirement age, with a third of people over 65 expecting to continue in employment until they are 71. Another 9 percent admitted that they expect to be working until they are 80 years old. Freelancing gives a flexible opportunity to many, including those at or approaching retirement age. Working through an umbrella company also enables freelancers or contractors to work without the extra burden of administration.

Craig Fazzini-Jones, director at MGM Advantage, said the situation was worrying. He added that it is essential for everyone to seek professional advice with regard to pensions and finances well before retirement. Unless people obtain advice to help them plan for retirement in advance, they will have to continue in employment for much longer to ensure adequate funds for when they do retire.

Experts advise everyone approaching retirement age to seek guidance to ensure you have sufficient funds to retire without having to rely on your property for funding.

There are many scenarios that can result in an overpayment by taxpayers, according to HMRC. These include working in several jobs during the year, starting a new job without handing in a P45 to the new employer, or working on several contracts in succession as well as claiming benefits in between periods of work. However, the new system was introduced to make these situations simpler to deal with.

HMRC has pointed out that the new system collected £250bn in taxes in 2009, which puts the overpayment figure into perspective. Many of the overpayments are due to HMRC but many more are due to other errors outside the control of HMRC. Many situations such as the ones above can make it difficult for a taxpayer to be given the correct tax code.

It is also possible that £1.6bn of tax overpaid for the years 2007-08 and earlier is still outstanding, with 18 million cases still unresolved. Any umbrella company contractors who think they may have paid too much tax in an earlier year should contact HMRC to check their liability.

HMRC also has the 24 month rule, which deems that working on the same contract at the same place of work for this length of time indicates a permanent place of work. Keeping track on the length of service for a particular client is essential to avoid falling foul of HMRC. As soon as you realise that your contract will last 24 months or more, you should stop claiming expenses. A reputable umbrella company will let you know if this occurs.

If you change contract, your new contract has to be at least ten miles away from your previous place of work as well as the route to work being substantially different, to identify your contracts as being separate.

Working through an umbrella company will minimise the paperwork and enable you to carry out your duties whilst your umbrella company deal with necessary administration. If you claim travel and subsistence expenses, ensure you satisfy all the conditions set by HMRC.

Director of Research at Institute for Employment Studies (IES), Jim Hillage said:

“We are now beginning to see the early signs of the public sector downturn, with vacancy numbers across public sector industries beginning to contract sharply. As these trends gather pace in the coming months, overall unemployment is likely to rise unless the recovery in the private sector will be sufficient to compensate for significant public sector job losses.”

The latest figures from the IES also show that the number of part time employees who are not able to obtain full time positions is growing. 43 percent of the over 50’s have been unemployed for more than a year.

Freelancing may be a viable option for many who are unemployed and yet have valuable skills, as freelancers offer a flexible option for many employers in this fragile economy. For short term freelancers, an umbrella company offers the ideal solution, enabling a freelancer to concentrate more on finding work and less on administration.

Keith Stevens, of Wilkins Kennedy said:

“In almost every recent case, the director said ‘my accountant told me to do it’ or ‘I did it because my accountant told me to.’”

Stevens also confirmed that there was a real possibility of accountants having to face legal action, which has resulted in them wanting to meet and discuss the situation. Accountants should be aware of their clients’ activities and accounts to ensure they do not end up with legal claims as a result of giving bad advice.

Wilkins Kennedy has also stressed the importance of limited company directors and owners taking responsibility for their actions, and not heaping the blame on their accountants. Company owners and directors have a duty to show they acted in a responsible manner.

Insolvency practitioners have been approached by HM Revenue & Customs to investigate the problem of illegal dividends and loans because HMRC is concerned that companies are using this method to avoid payment of tax debts. An illegal dividend or loan is when the dividend is taken out of a company without sufficient profit to cover the amount. It is illegal to remove assets for yourself and leave creditors unpaid.

A limited company formation is one opportunity open to freelancers to maximise their income. However, working through an umbrella company will remove much of the responsibility for administration whilst generating maximum income from legitimate expense claims.