If you work as an IT Contractor or consultant running a business in the IT field, you are likely to be affected by some of the changes announced to the tax system in the recent budget. For example,if you run a limited company another huge cut in dividend relief, following on from the cut that came into effect in April 2016. All in all, if you are self-employed or run a company you will be likely to pay more tax.
If you run a business through a limited company, the amount of money you can take in dividends without paying tax has been reduced by more than a half from £5000 to £2000. So limited company directors will pay more tax on what they take from their company. This is the second time in the space of a year this figure has changed.
What I wanted to do though was look at how these economic decisions can impact on the business community.
This got me thinking about what data would be available in this area. The UK government makes many of its data sets available, for free online. In this post we’ll look at using the Companies House data set that you can download from https://data.gov.uk/.
More Self-employed people
One of the arguments for the changes, is that these days there are most self-employed people. Is this true? I suspect so. Most IT contractors and consultants operate through a limited company. There are many reasons that IT contractors make this decision in running their business that are outside the scope of this post. But has there been an increase in the number of IT contractor’s operating through a limited company?
Companies house is the government department/organization that is responsible for registering companies in the UK, makes part of its data set available free, that you can download. You can get it from the data.gov.uk website. It comes in a set of CSV file. I downloaded these and imported them into may favorite database SQL Server using SSIS. See the link?
I wanted to look at whether the number of registered companies that work in the IT area had increased over time. I ran a query that pulled out all the companies with a Standard Industry Classification (SIC) code that contained Information technology in the description.
It turns out there are two codes in use:
62020 - Information technology consultancy activities
62090 - Other information technology service activities
I also wanted only the companies that had been created since 1990 – so we can see how the figures have changed over the last 30 years. Just note, I am just looking at companies that have been created in the time frame – this doesn’t mean that the company is still active or ever was active it could have always been dormant, but someone took the time to register a company with that SIC during this time
I imported the companies house data into a SQL Server database table called CompanyData.
This is my query for extracting number of IT companies created each year
SELECT YEAR(IncorporationDate) as Yr
,COUNT (*) AS NoOfCompsCreated
WHERE YEAR (IncorporationDate) > 1990
AND ( [SICCode SicText_1] = '62020 - Information technology consultancy activities'
OR [SICCode SicText_1] = '62090 - Other information technology service activities')
Group by YEAR (IncorporationDate)
ORDER BY Yr
I grouped by year of incorporation to break the count down by year. I also wanted to play with Power BI to do some visualization.
The results are very interesting since 1990, and since around about 2010 in particular there has been a huge increase in the number of IT related companies registered with companies house. Maybe more people are slef-employed.
How does the budget policy and other poltical decisions impact on you can see, 2016 saw a dramatic drop in the number of IT companies created. You can see a snippet of the queries results below:
2016 saw just over 15000 IT companies registered at Companies house, compared with over 25000 in 2015 and over 21000 in 2014. Quite a drop in the number of new companies created. Approximately 10000 less companies created in 2016 compared to the year previous. You can see on the graph how the financial crisis of 2007/2008 and 2009 had an impact on IT company creation too, perhaps not as dramatic. As what happened in 2016…A major change in dividend tax and of course everyone’s favorite Brexit!
In the next post we’ll drill into these figures a little more to see if you can decide if it was Brexit, the dividend tax change or something else that caused the decline in company creation.
If you want to learn how to write SQL queries like the ones used in this post, check out our IT Training page