With the Tories suffering serious blows in the Election, Brexit negotiations under strain and constant political in fighting, predicting what will be in the Budget is tough this time around.
The current economy of mixed messages, talk that the PM and the Chancellor rarely now see eye to eye, and the first interest rate rise in 10 years, makes me wonder if even they have a clear plan?
2017 will see an unprecedented third version of the Finance Act in a year when the Chancellor announces his Autumn Budget on 22 November 2017. So amid all this uncertainty, how might contractors be affected by the Budget?
More IR35 reforms
Recently the contracting market reeled with rumours that the IR35 reforms, so poorly introduced for the Public Sector, will be extended to the Private Sector. Although HMRC continue to infer all is rosy with the reforms, it’s far too early for these rules to be properly assessed by government. It’s also clear they are not happy that the market migrated contractors from limited companies to Umbrella companies, something that HMRC were not expecting and definitely wanted to avoid.
The expected changes to NIC for the self-employed have just been delayed another year with confirmation they will come into effect 6 April 2019 on the back of the need for further consultation and there lies the clue of where we feel the Chancellor will go. For some years now contentious legislation has been preceded by formal consultations and it’s more likely that IR35 reform for the Private Sector will be in the form of a consultation of new legislation, rather than a roll out of the same system.
Our prediction is that the Chancellor will hold fire, consult and then change both Private Sector and Public Sector together in yet another stab at the reforms.
The Taylor Report
It’s possible that the Chancellor will introduce new legislation and formalise the concept of a ‘dependent contractor’. Although focused more on the gig economy / freelancer rather than the Limited Company contractor side, a change would bring some of the self-employed, (such as Uber drivers and Deliveroo delivery riders), into line with employment rights and possibly taxes.
Reduction in VAT threshold for small businesses
Remaining on a business theme, we could expect to see some reform of VAT for small businesses, reversing past practice and reducing the VAT threshold to pull in many more businesses. This would reflect a view that the Office for Tax Simplification holds that the limit is holding the economy back by discouraging growth. Of course making more businesses register for VAT could also add funding to the Exchequer as the goods and services provided by unregistered traders would generate net VAT gains.
And what about housing?
Alongside this, expect to see a big push into funding new housing, with a large investment in Help to Buy, reductions in stamp duty for first timers but a further attack on stamp duty and tax on second homes. Such measures reflect the view that too much wealth is tied up in second homes that could be better deployed in other investments that benefit the economy in the shorter term.
Pensions and loans
Pension tax relief will also be a target with the older generation being called upon to help finance the pension contributions of those in their 20’s and 30’s. And of course, highly likely will be a response to the opposition parties, with vote attracting changes for student loans.
These are the key areas we expect to see, but in the current political climate, we’ll be ready for some surprises too.
If you have any questions about how the Budget might affect you as a contractor, or to find out more about our contractor accounting services, get in touch now on 01202 375 562, or live chat / email us.
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.