Chancellor George Osborne’s plans to ‘reduce the costs of employment, ease the tax burden on businesses and stimulate investment’ is looking good for contractors and freelancers.
There are a number of changes that come in to play from 6th April 2015 that contractors and freelancers should be particularly aware of:
- The personal allowance will increase from £10,000 to £10,600. This means that you will not pay any tax if your income is less than £10,600 in the year, which could result in a tax saving of £120 for some contractors and freelancers.
- The Marriage Allowance allows a transfer of part of your personal allowance to a partner. If your income is less than £10,600 and your partners is less than £42,385 then you can transfer up to £1,060 of your personal allowance to your partner. Again this could create another tax saving of up to £212 for contractors. HMRC will amend your tax codes to reflect this. You can apply for this allowance here.
- The VAT registration threshold increases from £81,000 to £82,000. You are now required to register for VAT when your company turnover is more than £82,000 and are able to deregister when your turnover is less than £80,000. Obviously if you have voluntarily registered for VAT to benefit from being on the flat rate scheme then this will not affect you.
In addition to the changes George Osborne announced that will be coming in to play on 6th April 2015, there are other important points that you should be aware of:
- RTI Penalties are in force. Contractors and freelancers operating through their own Limited Company are now affected as HMRC have introduced filing penalties on 6th March 2015 for those employers with less than 49 employees. If FPS submissions are not made on or before the date that employees are paid a penalty will be charged. If no payments are made then an EPS submission should be made to HMRC.
- Taking tax free dividends before the end of the tax year. If you have reserves in your company and are not yet a higher rate tax payer it is worthwhile taking further dividends before 5th April 2015.
If you are a contractor or freelancer and have any questions in regards to how any of these changes will affect you please do not hesitate to contact us on 01204 357 105. Or if you are thinking of changing your accountant in line with the new tax year please get in touch. One of our specialist contractor accountants will be more than happy to advise you of our service offering and answer any queries you may have.