3 things to expect from the 2015 Autumn Statement
Earlier this week Chancellor George Osborne announced that the first purely Conservative Autumn Statement will take place on November 25th 2015.
The Autumn Statement has, in accountancy circles, grown to become a sort of ‘mini-Budget’. However, a lot of the announcements we’re expecting in this November’s statement are continuations and extensions of changes put forward as part of the Summer Budget.
With a little over two months to go until the next budget announcement we’ve put together a preview, analysing how some predicted changes could affect contractors in the UK.
The ‘anti-contractor’ Summer Budget
The last Summer Budget was seen as being particularly ‘anti-contracting’ by many industry insiders. The Budget Report contained several policies which will directly or indirectly punish contractors.
Among the attacks was the Chancellor's move to replace the dividend tax credit with a £5,000 tax-free allowance, making work potentially more taxing for those with limited companies who pay themselves in dividends. This change is scheduled to come into effect in April 2016
Another measure punished any contractor who was the sole employee of their own limited company. In the Summer Mr Osborne said that these individuals would be prevented from claiming the NICs Employment Allowance.
With so many negatives for contractors last time round, you might be forgiven for thinking contractors would get a better deal in the Autumn. However, some warning signs could signal yet another anti-contractor budget statement on the horizon.
We’ve detailed three changes that we think could arise in the Autumn Statement.
The IR35 is one of the favoured tax regulations for Treasury tinkerers. Having already been tweaked a number of times by 2015, the Treasury announced in their summer budget that they want to alter it further.
An extract from the Summer Budget report read:
“The government will engage with stakeholders this year on how to improve the effectiveness of existing intermediaries legislation (‘IR35’) which is designed to protect against disguised employment. A discussion document will be published after Summer Budget 2015.”
Earlier this year, HMRC launched an IR35 consultation period which is due to close at the end of September. An 11 page “discussion document” which sets out the consultation's initial framework was less than clear whether new changes were on the way. It says: “if” HMRC decide to proceed with reforms, “any proposals will undergo a full consultation”.
It seems likely that the Chancellor will propose a more thorough IR35 consultation in the Autumn Statement. Contractors would be wise to start planning ahead for a ‘worst case’ IR35 scenario, but the danger is not yet immediate.
While not a specific concern for contractors, many consider pensions to be ripe for reform. In the Summer Budget, Osborne announced a new consultation on pension tax relief.
While a complete overhaul of the system is unlikely, it does appear as though legislators are looking into changing how pensions are taxed. In particular, Ros Altman, the new pensions minister and ‘champion for older people’ is in favour of moving tax relief on pensions away from the very highest of earners.
So far there has been little information about proposed changes, but the Chancellor could use the Autumn statement to provide some more details.
Again, this proposal isn’t specific to contractors but it could affect those supplying the public sector. Mr Osborne warned in his Summer Budget speech that the Government would be making up half of the total £36bn cuts in the Autumn.
Any construction contractors who work closely with any non-ring fenced Government Departments should take stock of incoming work, and perhaps seek to balance away from the public sector.
The news probably won’t be all bad though. The November Statement is likely to include some ‘sweeteners’ – a new road or railway, perhaps with a lucrative contract attached.
It’s also likely that, as departmental belt-tightening drives more and more government services online, digitally inclined IT contractors will find themselves more in-demand.
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