The Chancellor George Osborne gave his Summer Budget 2015 earlier this month in which he made a number of announcements about changes the Conservative Government are planning. Today, we take a look at the changes that specifically affect contractors.
Whilst contractors may feel they have been targeted in this Budget, we know the UK economy depends on contractors and freelancers for the long term.
Corporation Tax will be cut to 19% in 2017 with a further reduction to 18% in 2020.
Dividend tax credit will be replaced with a tax-free allowance of £5000 of dividend income for all taxpayers and the rates of dividend tax will be increased. There will be an increase of 0 to 7.5% for basic rate income tax payers, from 25% to 32.5% for higher rate taxpayers, and 30.56% to 38.1% for additional rate payers. There are increases in the tax burden due to these changes however we are considering opportunities that could lessen this increase.
This budget also saw contractors no longer being able to offset the £2,000 allowance against employers’ NIC arising on ordinary salary.
HMRC has been asked by the Government to begin a dialogue with business on how to improve the effectiveness of existing IR35 legislation. This has now begun and the Government’s aim is to find a solution which protects the Exchequer and betters the fairness in the system. We hope this is the opportunity to further clarify the legislation and we will continue to work closely with the FCSA to ensure any dialogue fully understands the contractor position.
Travel & Subsistence Expenses Consultation
The consultation has already begun on travel and subsistence expense claims for contractors with ICS supporting the views of the FCSA as an Associate Member. The consultation ends on the 30th September and any new restrictions on travel and subsistence expenses for contractors which could come in from April 2016. We will keep you updated.
As an IPSE (The Association of Independent Professionals and the Self Employed) Accredited Accountant and FCSA Associate member, we are fully supportive of the work they are doing in relation to protecting the freelance and contractor workforce.
The IPSE already have a high level meeting set up at HMRC where they will be raising their concerns about the negative impact some of the Summer Budget announcements will have for their members. We’ll keep you updated on how that meeting goes.
If you’re a contractor with a limited company and wish to discuss the budget announcement in further detail, you can speak to us online or by calling 0800 195 3750.
Contractor Accountants, Think ICS.
Article written by ICS’s Managing Director, John Lyon, and ICS’s Marketing Manager, Anna Bell.