The Spring Budget announcement was delivered on March 8, by Philip Hammond, Chancellor of the Exchequer. His statement soon turned towards Self-Employment, National Insurance, VAT, Employment Practices and Making Tax Digital.
Here’s everything you need to know about the budget announcement that may affect your working life as a Contractor, Freelancer or Self-Employed Professional, trading through a limited company.
Dividend Allowance
The Chancellor raised concerns about the gap in payable tax and NICs between employed workers and self-employed workers trading through their own company. The Chancellor of the Exchequer said,
‘The difference in national insurance contributions is no longer justified by the difference in benefit entitlements, such dramatically different treatment to two people earning essentially the same, undermines our tax system.’ He continued.
‘Employed and self-employed alike, use our public services in the same way, but they are not paying for them in the same way’.
The tax-free dividend allowance has been reduced from £5000 to £2000 effective from April 2018.
Our analysis suggests that this will increase the tax liability of those in receipt of dividends by a maximum of £225 where your income, before considering dividends,does not exceed the higher rate threshold- this is because the £3,000 reduction in dividend allowance becomes taxable at 7.5%.
National Insurance
During the Spring Budget announcement, it was proposed that class 4 national insurance would increase from 9% to 10%, from April 2018.
Theresa May later announced that the NIC rise will be delayed until the Autumn Statement.
Update 15/03/17:Philip Hammond, Chancellor of the Exchequer, has announced that the decision to increase Class 4 NIC for self-employed professionals has been reversed.
“In the light of what has emerged as a clear view among colleagues and a significant section of the public, I have decided not to proceed with the Class 4 NIC measure set out in the budget.”
VAT Threshold
The VAT threshold is to increase to £85,000, from April 2017.
Review of Employment Practices
There is an ongoing review of employment practices being conducted by Matthew Taylor.The chancellor has suggested that this will discuss the tax regime for flexible workers and thereportis expected overthe summer.
Making Tax Digital
The scheme is part of the government’s plans to make recording tax returns easier. This means recording taxes on a quarterly basis, rather than submitting an annual tax return.
The introduction of Making Tax Digital has been delayed for businesses under the VAT registration threshold to April 2019.
The Spring Budget 2017 was the last of its kind. As of today, it will be announced just once a year, during the Autumn period which leaves more time to prepare for proposed changes for the new tax year.
At Gorilla Accounting, we believe in proactively informing our clients on upcoming and current legislation changes. If you have any questions about our service, give us a call on 330 024 0406 or email info@gorillaaccounting.com.
