Chancellor Philip Hammond has delivered his first (and last) spring Budget, and introduced measures which have a direct impact on the nation’s contractors and self-employed people.
Peppered as it was with several jokes at the expense of the Opposition, the Chancellor’s Budget showed he was deadly serious about putting contractors in his sights, claiming they and the self-employed have an unfair advantage over employees when it comes to tax and National Insurance.
What he fails to see, of course, is that while there may be tax advantages to being self-employed, those who work in this way are more at risk from interrupted income, and they don’t have the cushion of benefits like sick pay and extended parental leave that are enjoyed by those in employment.
So if you are a contractor you’ll want to take note of the changes coming in – and we just hope this isn’t the first salvo in a war being waged by the government on contractors and the self-employed.
National Insurance Contributions (NICs)
As expected, the Chancellor announced changes to NICs. He stood by the plan of his predecessor, George Osborne, to abolish Class 2 National Insurance from April 2018. But once this happens, Class 4 NICs will rise by 1% to 10%. This may not be a big hit to your take-home pay – indeed, those on lower incomes may be better off – but it is likely to be the first of many volleys against contractors.
Those who run limited companies – and this can apply to contractors – will be affected by a reduction in the tax-free dividend allowance for shareholders from £5,000 to £2,000 from April 2018. Again, this is a measure by the Chancellor to make the tax system more ‘fair’ for the employed and less weighted towards the self-employed. He cited the growth in the numbers of self-employed people as one of the reasons – but in the same breath acknowledged entrepreneurs and innovators are the “lifeblood” of the economy.
One bit of good news is there was no change announced to the pension allowance – in the face of reductions to other self-employed allowances this is welcome.
Interestingly, there was a lot that wasn’t mentioned, including housing, Stamp Duty, buy-to-let, mortgages, IR35 and – the elephant in the room – Brexit!
Media Contact: Sarah Middleton, Public Relations Manager
Tel: 01489 555 080