During today’s Autumn 2017 budget, Philip Hammond delivered his second budget as Chancellor. The budget contained very little in the way of surprises or complexity, however, there were several key points which potentially provide an insight to future tax and fiscal policy;
The key messages for contractors and freelancers were as follows;
No rollout of IR35 for the private sector
Many commentators had predicted the recent public sector IR35 reforms were likely to be extended to the private sector, however, it appears, the Chancellor has buckled under increasing pressure and instead is set to launch a consultation to assess the impact of any proposed amendments to the existing rules.
While it appears unfeasible to have a dual system operating for the private and public sector, the potential launch of a consultation demonstrates the sensitivity attached with extending the rules to the private sector and to some extent recognising the failings in its reforms to the IR35 rules for the public sector.
VAT threshold has been frozen at £85,000 until 2019
On the surface, the freezing of the VAT threshold at £85,000 until 2019 appears to be good news for contractors. However, against a backdrop of rising inflation this will result in a real term reduction to the VAT threshold.
Contractors and freelancers not registered for VAT will have to remain vigilant in case they are landed with VAT obligations.
Personal allowance increased to £11,850
From April 2018. The personal allowance will be increased to £11,850 from its existing level of £11,500. The will mean an additional £70 to spend as you please.
The 40% tax threshold starts from £46,350 from April 2018
For higher rate tax payers, the 40% tax rate threshold has also been increased from £45,000 to £46,350 from April 2018. Coupled with the increase to the personal allowance, a higher rate tax payer will save £340 a year.
No changes to rates of income tax, dividends tax and capital gains tax
Below is a summary of the tax rates for the current tax year which are to remain the same going into the 2018/19 tax year.
|Basic rate||Higher rate||Additional rate|
Diesel company car tax supplement increased from 3% to 4% from April 2018
An employee with a diesel company car will see an increase in the company car tax they pay.
For example, an employee with a £30,000 diesel car would see their annual diesel supplement tax rise by £300 a year.
How can Nexus help?
As specialist contractor and freelance accountants, our team has years of experience in the contractor market. If you are thinking about a contract role and would like to find out more please call our help desk on 0161 791 1674.