Taj Kang gives an update after the Spring Budget 2017, and reveals implications for contractors, the housing market and how it affects you.
Hello and welcome to my blog, this blog has been delayed a little, since the Spring Budget from Mr Philip Hammond, the reason being there seems to be a little bit of a debate rumbling on in the cabinet between the Prime Minister and the Chancellor regarding the content of his Budget. Most of you would have noticed that was an attack on National Insurance contributions by the Chancellor in the original budget, where he actually increased the levels from previously despite a pledge in the Conservative Party manifesto in 2015, where David Cameron, the previous Prime Minister, had actually promised there would be a tax lock, and no such increases to National Insurance.
So what was Chancellor looking to achieve with this?
The first thing is there is a larger move from employment towards self-employment in the United Kingdom workforce. Obviously a lot of you are contractors, you have made such a move yourselves, but it’s filtering down into the less technical occupations as well, and the less white collar occupations as well.
So what the Chancellor was trying to do, was to make sure that the increased National Insurance rates that are paid by employed people are on a par with what happens with self-employed people.
The problem is he didn’t consult the Conservative Party manifesto, so within 24 hours of his budget, Theresa May came out and said we don’t actually plan to implement this immediately, and it was deferred, and then the Chancellor himself came out with a letter, which was published in the broadsheets, which basically said his approach is the right one, but he doesn’t intend to bring this in right now.
So lots of strange goings on, and a bit of an undermining of the creditability of the new Chancellor, but there you go, that’s Politics for you.
So in other news from the Budget, the more topical stuff for contractors, it wasn’t a great budget for contractors if I’m completely honest, IR35 reared it’s ugly head again, public sector workers who are contractors will no longer be able to use public service companies, and we also have the payroll style companies as well and the tax benefits offered by those have been clamped down on if you are working in the public sector as a contractor.
No real surprises there because it’s been in the offing for a while, but it’s a further clamp down on people who the Government deemed to be disguised employees.
So another move that the Chancellor made against those of you who are contractors, was another undoing of what happened previously, so George Osborne brought in a dividend tax allowance, so the first £5,000 worth of dividend income would not be taxed. What this Chancellor, Mr Philip Hammond actually did, was to unwind that down to £2,000 as a taxable allowance. It hasn’t been in very long, as it’s already been scaled back by the same Government, but a different Chancellor.
So again not fantastic news for contractors. Beyond that there wasn’t really a lot else to report in terms of good or bad news, I for one was hoping that those of you who are landlords, will be speared any further clamping down on tax allowances, so many people have moved there personally owned properties, under the umbrella of a limited company, in order to avoid the interest relief erosion that the Government has brought in.
I was half expecting that the Chancellor may bring in some kind of closing of that loophole, but that hasn’t happened, so good news that those tax allowances can still be achieved as long as you move properties into a limited company setup. In that regard it’s a good idea to speak to a tax advisor first, and then with a mortgage advisor if the tax advisor says it’s a good idea.
So that’s it in terms of tax and contractors are concerned, and this budget which has been a very eventful one, particularly with the fall out that happened afterwards, and the sniff of inviting at the top of the Conservative Party.
A one to watch, thank you very much for watching as well, and we keep you informed of the developments over the next month or so. Many thanks.