How the Autumn Budget affected contractors

How the Autumn Budget affected contractors

Dec 13, 2017

The Autumn Budget 2017 contained mixed news for contractors. With a £44bn investment in the UK housing market, and a target to develop 300,000 new homes each year for the next five years, the construction industry looks set to benefit. There was also good news for NHS workers thanks to an additional £6.3bn funding which may in time filter down to locums and other contractors. Here’s a round-up of what you need to know.

IR35 and the private sector

There has been much debate about the Government’s intention to extend the current public sector rules on IR35 into the private sector. Following the Budget, the Government will now conduct a consultation exercise, a move welcomed by organisations such as the Federation of Small Businesses (FSB) and the Freelancer & Contractor Services Association (FCSA)

If the proposed change goes ahead, responsibility for deciding if IR35 applies shifts to your employment agency or end client. If so, it is likely that your take-home pay would be affected as your company would be paid your day rate with Income Tax and National Insurance deducted.

FSB National Chairman Mike Cherry called it a ‘sensible’ approach and said: “We told the treasury that it can’t roll out the changes applied in the public sector to the private sector until there is clear evidence of its impact to date. We look forward to feeding in to a consultation on this issue and ensuring the rights of the genuinely self-employed are protected.”

The FCSA said: “This is fantastic news and shows that the Government has finally listened to FCSA’s many concerns regarding the public sector changes already in place, their devastating impact on the public sector and increase in non-compliant schemes that have resulted. It is very positive that the Government has not simply bulldozed ahead with legislation that would have a negative impact on the flexible workforce and the UK economy as a whole.”

If the changes do come into force, we are here to help you understand the impact and to determine the right working option for you to take. It may be that you can accept the changes and the impact on your take-home pay; you may be able to negotiate a higher day rate or you may be better off switching to an umbrella company like Umbrella Plus.

VAT threshold

The Chancellor announced that the VAT registration threshold would remain the same until April 2020 at £85,000, a move which will please many contractors, especially those earning just above or just below the threshold.

Taylor Review recommendations

The Taylor Review of Modern Working Practices considers the ‘implications of new forms of work on worker rights and responsibilities, as well as on employer freedoms and obligations’. In the Autumn Budget, Chancellor Philip Hammond announced that the Government will publish a discussion paper as part of the response to the Taylor Review, which would affect self-employment taxes and employment rights for contractors. It could also see the introduction of ‘dependent contractor’ status which aims to address the so-called gig economy in which firms hire individuals on a self-employment contract, but the actual working conditions more closely resemble employee status.

Change to dividend allowance

If you run a limited company/PSC, and pay yourself a dividend, then you’ll be affected by the announcement that the tax-free dividend allowance for 1018/19 will drop from £5,000 to £2,000 from April 2018, though future plans are unclear at present.

“We told the treasury that it can’t roll out the changes applied in the public sector to the private sector until there is clear evidence of its impact to date,” said FSB National Chairman Mike Cherry.

If you would like further information on any aspect of working as a contractor, please get in touch with our team of specialist contractor accountants on 01244 684700.

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