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The Chancellor, Rishi Sunak, presented a “mini budget” on Wednesday 23rd March 2022 – an update of the Government’s plan for the economy against the backdrop of a cost of living crisis and rising inflation. As expected, this was a “tax-light affair”- but did the Chancellor do enough to relieve the pressure on businesses and consumers – driven principally by rising energy costs?

As predicted, the relatively badly timed Health and Social Care levy will be introduced from 6th April 2022. However, there was an element of “silver lining” with regards to the uplift of the NIC primary threshold (Employee’s NIC threshold) up to the personal allowance level of £12,570 from July 2022 which will benefit lower paid employees. In addition, the increase in the Employment Allowance to £5,000 from £4,000 (which provides employers with Employer National Insurance savings for eligible employees up to the allowance level) in April 2022 is also welcome.

As noted previously, for the 2022/23 tax year the levy will be implemented by a simple increase in the rate of Class 1 NIC (including Class 1A and Class 1B paid by employers on employee expenses and benefits) and Class 4 NIC. The increase will be 1.25% for employees, employers and the self-employed, so a total increase of 2.5% in respect of employed workers (split between the employer and employee) and 1.25% for the self-employed. If individuals take their income in the form of dividends from their personal service company, the tax rate on those dividends will also rise by 1.25% from April 2022.

However, there is a clear indication that the Government now sees the IR35 reform as being fully implemented. The Chancellor made no reference to IR35 in his statement, so for the flexible labour market in particular, end hirers and their supply chains, it should now be “business as usual” with regards to their IR35 processes. It is worth noting that HMRC’S “soft-landing period” in respect of the IR35 legislation ceases in April 2022, so compliance here is key going forward.

In our previous Budget output blog, we emphasised that end hirers and recruitment businesses who fail to manage their obligations could face serious commercial implications, whilst those who continue to support genuinely self-employed contractors will benefit significantly from this change and this continues to be true.

Brookson, of which Intouch Accounting are a part of, continues to help hundreds of private sector end hirers and thousands of recruitment agencies through audits of their workforce, supporting them in continuing to take reasonable care in respect of IR35 and managing supply chain compliance.

Clarity in respect to IR35 determinations and working options continues to be crucial for contractors too. Flexibility is now needed in the way contractors operate and seeking the support of a trusted partner to help manage inside and outside assignments is essential.

Intouch customers benefit from our unique service called Flex. Flex allows contractors to switch between limited and umbrella working with a wrap-around of specialist accountancy, tax advisory, legal and financial services tailored to their circumstances.

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