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Budget November 2017 – Key Points for Contractors
Overall a quiet budget for contractors, the main talking point before, and after, was the private sector IR35 reforms which it would seem are now inevitable. There were some silver linings however, with the announcement of consultations and discussion documents leading stake holders and contractors to believe they will have some input into the reforms, unlike the quickly deployed changes to the public sector. While there is no firm date as yet, it is widely expected these changes will be implemented in April 2019.
Personal Allowance – This will rise to £11,850 with the higher rate threshold increasing to £46,350.
VAT Threshold – This will remain the same at £85K for the next two years from April 2018, despite calls from the Office of Tax Simplification to reduce the threshold.
Pension Savings – The lifetime allowance will increase to £1,030,000.
Making Tax Digital – The chancellor stated the plan to implement making tax digital is on schedule for implementation in 2019.
National Insurance Contributions – Class 2 NIC’s of £148 a year will now not be abolished until April 2019 (A delay of one year), these contributions are paid at a flat rate of £2.80 a week by anyone making profits of more than £5,965 a year.
Stamp Duty – This will be abolished for first time buyers on properties with a value up top £300K.
National Living Wage – This will increase by 4.40%, from £7.50 to £7.83 an hour.
Business rate Relief – This will change from RPI to CPI.
Dividends – From April 2018, contractors with their own PSC/Ltd Company, there will be a cut in the tax free dividend allowance from £5K to £2K.
Change in taxation of employee business expenses
Guidance & claims process – HMRC to work with third parties and improve guidance on travel and subsistence and look at the process for claiming tax relief on non-reimbursed employment expenses.
Training personal expense – A consultation will take place in 2018 on extending the scope of tax relief available to employees & the self-employed for work related training costs.
Subsistence benchmark scale rates – From April 2019, employers will no longer be required to check receipts when reimbursing employees for subsistence when using benchmark scale rates. Subsistence and accommodation rates will be on a statutory basis, in order to provide greater certainty for business.
Opportunities for contractors following Public Investment
The NHS will receive an additional £6.3B in funding, of which, £2.8B is ring-fenced for resource funding. This extra funding may benefit public sector workers such as Locums, self-employed nurses and social workers who found their income substantially reduced after the public sector IR35 changes.
The UK housing market will benefit from a £44B investment with the aim of developing 300K additional homes over the next five years and provide a much needed boost to the construction industry.
Focus on Tax Avoidance for large corporations, possibly diverting the focus from Contractors
Tax avoidance & evasion measures were announced mainly for large corporations, hopefully devoting resources to these corporations and taking the spotlight away from the innocent contractor who prove to be an easy target.
Taylor Review recommendations considered by the government
A discussion paper will be published by the government in response to the Taylor Review of Modern Working Practices. This centres around employment status tests and tax, if the recommendation’s are put into action as they currently stand, there are several potential outcomes:
The alignment of tax law and employment status law which could render IR35 obsolete
An increase in self-employment taxes
Employment rights for contractors who are taxed as employees
The introduction of ‘Dependent Contractor’ status