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How Does The Autumn Statement Impact Freelancers & Contractors?
As the number of self-employed professionals in the UK swells to 4.79 million, many freelancers and contractors kept a close eye on Westminster for the Autumn Statement 2016. Proposed changes to IR35 and the new Making Tax Digital initiative were high on the agenda, but how did the government deliver against expectations?
To bring you up to speed on the Autumn Statement and what it means for freelancers and contractors, let’s take a look at some of the key points:
Public sector changes to IR35 confirmed
It’s no secret that the government is intent on curtailing the tax savings made by contractors. IR35 is a hot topic; contractors have been campaigning hard to highlight problems with the proposed changes to public sector off-payroll contracts.
Despite these efforts, the Autumn Statement confirmed that the government will push ahead with its plans. From April 2017, it will be the end client’s decision whether or not the contractor/company is inside or outside of IR35 stipulations. The move is likely to drive a lot of self-employed professionals away from working with public bodies.
VAT flat rate scheme increases
Another aspect of the government’s clampdown on taxation of the self-employed is changes to the VAT flat rate scheme. Labour-only businesses will now be subject to a 16.5% rate, reducing the financial savings made through VAT registration.
This will make flat rate schemes far less attractive for freelancers and contractors, meaning that many will avoid voluntary registration and choose the standard rate VAT scheme when they do hit the threshold.
Savings for the self-employed
However, it wasn’t all bad news in the Autumn Statement. The government stuck by its pledge to abolish Class 2 National Insurance contributions. This will save independent professionals £130 every year, coming into effect from April 2018.
Looking ahead to 2020, the future is also promising. On Wednesday, the Chancellor reaffirmed the commitment to reduce corporation tax to 17% by 2020, which is great news for directors of limited companies. Meanwhile, the tax-free allowance is set to reach £12,500 by 2020.
Delays to Making Tax Digital announcements
This year’s Autumn Statement was notably slimmed down, at less than half the size of the one presented in 2015. So there were a few key announcements that were skipped over by the Chancellor, including an update on the Making Tax Digital initiative.
As the consultation period has just come to an end, feedback was widely anticipated on Wednesday. However, the government has postponed announcements on MTD until January, meaning we’ll have to wait and see how digital tax accounts will play out.
So there you have it – a speedy roundup of some of the most important announcements (or lack of) affecting freelancers and contractors in the Autumn Statement. We’ll be keeping a close eye on how these developments pan out over the coming months.
Want to learn more about how they impact you? Give our specialist accountants a call on 0161 669 4221 or email info@biaccountancy.com to have a chat with our team.