Umbrella.co.uk Budget Briefing
The Chancellors fourth Budget in 12 months arrived on Wednesday and it confirmed a number of policy changes that we already knew were going to arrive. Restrictions on Travel and Subsistence tax relief for IR35 contractors and changes to the dividend tax will take effect as planned in April.
The most significant new announcement will be of concern to contractors working through a personal service company (PSC) in the public sector.
An HMRC policy document reveals that from April 2017, public sector organisations will be responsible for enforcing IR35. This marks a significant change from the current system, whereby the PSC or agency judges whether a contractor is caught out by IR35.
Effectively, this means that many more public sector contractors will fall under the remit of IR35 legislation and will receive less take home pay as a result. This change is scheduled to take effect in April 2017 following a consultation.
Anybody who thinks they will be affected by this change should not be rushed into making a decision. At this early stage, our advice to clients is to wait and see how the rules are applied, before you change how you operate.
We have published a more in-depth blog post to offer more guidance on the changes.
There was some positive news in the Chancellor’s budget. In addition to the increased thresholds for taxation for both basic and higher rate taxpayers, the abolition of Class 2 National Insurance contributions will benefit self-employed contractors.
Some customers may also benefit from more business rate relief and others, with substantial investments, could benefit from a reduction in Capital Gains Tax at both the basic and higher rates.
For more information about the latest budget proposals and policies, please contact a member of the Umbrella.co.uk team. Call: 0800 121 6513.