Budget Summary – What does it mean for contractors?

Google reviews
July 09, 2015
n

In light of the 2015 budget being announced yesterday, we take a look into what this means exactly for contractors and freelancers.
As originally feared, all in all, the budget brings bad news for the majority of contractors. We have picked out some of the points raised that will be of interest to contractors.

The good

  • Personal Allowancethe current allowance of £10,600 will be increased to £11,000 in the 2016/17 tax year. Meaning you can earn £11,000 before paying any personal tax.
  • Longevity and Jobs boostit was announced that the forecast for job’s growth will increase, with businesses more likely to hire employees and invest.
  • Corporation Taxthe current 20% rate will be cut to 19% in 2017 and 18% in 2020.
  • Basic Rate Bandthe basic rate band (currently £42,385) will be increased to £43,000 in 2016/17 tax year.

The bad

  • New dividend structurethe current dividend tax credits are to be replaced by a £5,000 tax free allowance for dividends. After which any additional dividends will be taxed at 7.5% up to the basic rate band, then 32.5% and 38.1% (for additional rate tax payers over £150,000 income).
  • Employment Allowancecurrently £2,000, the employment allowance is to be removed from companies which the sole employee is the director of the company. Further information will be required to clarify whether a spouse second employee will change this.
  • IR35 reformthe government has asked for HMRC to start a dialogue with business on how to improve the effectiveness of existing IR35 legislation. They said they “want to find a solution that protects the Exchequer and improves fairness in the system”. We would advise getting a contract view before each new contract.

The ugly

  • Travel and Subsistencefrom 6th April 2016 the government has proposed that tax relief be removed for home to work commuting for those employed through an umbrella company. Seems like now is the time to have a good rethink on how to operate (umbrella or limited company).

Want to find out more?

If you would like to know how the budget could impact you and your company, or how you can set up a limited company, then get in touch with one of our experts today.

Info@biaccountancy.com
0161 669 4221  

UK Treasury Budget

Resources

Recent Articles

New Pension Schemes Bill to benefit 20 million workers

New Pension Schemes Bill to benefit 20 million workers

The Government’s new Pension Schemes Bill is expected to make it easier for millions of people to manage their pensions, by improving returns, and combining smaller pension pots to create bigger and better pension funds. The benefits of combining smaller pension pots...

Record number of self-assessments sent in first week of tax year

Record number of self-assessments sent in first week of tax year

Just under 300,000 self-assessment tax returns were filed in the first week of the 2025/26 tax year, according to HMRC, way ahead of the deadline of January 31, 2026. A total of 299,419 tax returns were filed between April 6 and April 12 – 28,503 more than the same...

Changes to umbrella company payments could reduce wages

Changes to umbrella company payments could reduce wages

Umbrella companies are typically used by recruitment agencies to employ workers on temporary contracts, in sectors like IT, healthcare, construction and education. Usually, the contractor or temporary worker will work for a client, the client pays the recruitment...

Ready to join us?

Whether you’re a contractor, freelancer, or small business, Bright Ideas can help remove the burden of time-consuming and complex finances. We’ll draw on our years of knowledge and experience earned helping sole traders just like you.

When you choose us, you’ll be assigned a dedicated Account Manager who’ll provide one-on-one support that’s customised to your business. Communication is key, so we’ll always answer your questions or requests as soon as we can. In fact, we offer a same-day response guarantee for emails and calls received before 3pm.

Contact us to get started

Give us a call us or send an email today!

Looking to Switch Accountants?

Does your current accountant give 1-to-1 support? Are they fast and thorough?
Slap-dash services hold businesses back, so try our expert accountants instead. We make the transition simple, get in contact with us today and we’ll start the process.

Start the conversation

Let’s make your finances Brighter

Call us Monday to Friday 9am - 5pm

0161 669 4221

Request a call back