The second budget of the year will take place on Wednesday 22nd November, when Phillip Hammond will set out the financial plans for the coming year. We’ve rounded up key factors Contractors and Freelancers should look out for.
Along with speculation around the IR35 public sector reform to be rolled into the private sector, there are a handful of measures that could be announced which could affect the way contractors and freelancers operate.
Let’s Talk Umbrella
As party policies unfolded in the run-up to the election, the Labour party stated in their manifesto (page 51) that they would clamp down on ‘bogus self-employment’ by,
“Banning payroll companies, sometimes known as umbrella companies, which create a false structure to limit employers’ tax liabilities and limit workers’ rights.”
Umbrella companies contribute in excess of £3bn in NIC and tax to the Exchequer, and an estimated 450,000 workers use Umbrella payroll services.
Backtracking on NIC Increase
In the Spring Budget 2017, Hammond announced that Class 4 National Insurance Contributions (NIC) will be increased from 9% to 10%, but this measure was later scrapped.
With cheers all around, the mist hasn’t quite set as there’s always the possibility that Hammond could make another U-turn and reinforce the NIC increase.
The last budget which was announced under the leadership of David Cameron pledged not to increase taxes and National Insurance for the self-employed, but it was later announced that the increase will take place.
Following disagreement from MPs and a significant section of the public, Hammond decided not to proceed with the change after all, but there’s always the possibility of a U-turn on a U-turn.
Matthew Taylor Report
The Matthew Taylor report on Modern Working Practices put forward key recommendations, such as an auto-enrolment pension scheme for the self-employed, along with a new ‘dependent contractor’ status.
The recommendations put forward by the Matthew Taylor report are subject to approval from the House of Commons. Taylor’s team developed the term ‘dependent contractor,’ which proposes to replace the current term ‘worker’.
Scrapping Corporation Tax Cut
Due to our planned departure from the European Union, a cut to Corporation Tax was proposed to attract businesses to the UK, and incentivise those that are currently operating in the UK to remain.
In the 2016 budget announcement, the Government announced that the corporation tax rate will be reduced from 20% to 17% by 2020.
There may be a possibility that this may be reversed as the Organisation for Economic Co-operation and Development (OECD) referred to this as a ‘generous ruling’, stating that it opens up post-Brexit UK to becoming a ‘tax haven’.
The Centre for Tax Policy and Administration advises developed nations on tax policy and analyses the effect of this on the political climate.
Reducing VAT Threshold
The Office of Tax Simplification (OTS) published its first report on VAT, suggesting a range of proposals which can help simplify VAT by reassessing thresholds.
The report which was presented to parliament found that the UK has the highest VAT threshold of £85,000 in the EU, where the average threshold is around £25,000.
As a result of this finding, Hammond could be expected to reduce the VAT threshold so that more businesses could be required to register for VAT.
Don’t miss our 60-second round-up
Philip Hammond will make the Autumn Budget statement on 22nd November at 12:30pm, which is based on key figures released by the Office for Budget Responsibility (OBR).
We’ll be releasing a 60-second round-up video which sums up the Autumn Budget for Contractors and Freelancers. Stay tuned through our social media for more details.
Follow us on Twitter, Facebook or Instagram.
Gorilla Accounting is a specialist accountancy firm, exclusively for Contractors and Freelancers operating through a Limited or Umbrella Company.If you would like more information, get in touch with our New Business Team by calling 0330 024 0406 or email info@gorillaaccounting.com.
