The Chancellor, Jeremy Hunt, has just announced that the April 2023 IR35 reform repeal – announced in Kwasi Kwarteng’s mini-Budget in September – will not be going ahead after all.
You can read the official Government summary of today’s u-turns here.
Watch the Chancellor @Jeremy_Hunt’s statement outlining the measures being brought forward from the Medium-Term Fiscal Plan that will support fiscal sustainability.https://t.co/faGd6A9YVp pic.twitter.com/1MWp4Y2ewv
— HM Treasury (@hmtreasury) October 17, 2022
IR35 ‘off payroll’ repeal has been repealed
In his September 23rd ‘mini Budget’, the then Chancellor Kwarteng announced that the IR35 ‘Off Payroll’ rules would be repealed from April 2023 onwards.
This means that the onus of determining a contractor’s employment status would revert to the contractor himself, rather than the end-client, as has been the case with since 2017 (public sector) and 2021 (private sector).
Now, following Hunt’s statement today, the IR35 / Off Payroll regime remains unchanged, after all.
The Treasury claims that this reversal will save £2bn per year.
Corporation Tax to rise to 25%
As was previously announced, the previous plan to raise Corporation Tax from 19% to 25% from April 2023 will go ahead, after all. This measure is expected to raise £18bn for the Treasury.
The ‘small profits’ rate will apply to profits up to £50,000, and the ‘full rate’ applies to profits of £250,000 or more.
Inbetween the two thresholds, a system of marginal relief will be put in place to taper the amount of CT paid.
Unfortunately, for contractors already disappointed by the IR35 reversal, this Corporation Tax rise will cost contractor limited companies many hundreds of pounds each year.
For example, a company with £60,000 annual profits will face an extra £750 CT bill from April 2023.
1.25% Dividend tax hike won’t be reversed
From April 2022, both National Insurance rates and dividend tax rates rose by 1.25 percentage points. Although the NI hike will be reversed shortly (November 6th), the dividend tax hike remains in place.
If you work via your own limited company, this 1.25% hike costs £12.50 per £1000 of dividends.
This measure is expected to raise £1bn annually for the Treasury.
Planned cut to the basic rate of income tax won’t go ahead
The planned 1p cut to the basic 20p rate of income tax has been shelved indefinitely.
Energy bill support scheme to be less generous
The current Government energy support will now only last until April 2023. Thereafter, the Treasury will consult on the best way to deliver targeted energy support.
Previously, the Government had pledged to provide universal energy support for 2 years.
You can read the official Government summary of today’s u-turns here.
More disappointment for contractors
Limited company owners have faced successive waves of targeted taxation over the past 20 years.
Not only has the IR35 reform repeal been cancelled, small company owners now face further tax hikes from April 2023 onwards – with the Corporation Tax rise and non-cancellation of the dividend tax increase.
Understandably, contractors have reacted badly to today’s news.
Sorry everyone! The Chancellor has just confirmed that the IR35 reform repeal won’t be going ahead after all next April. Very disappointing. Not only that, but the typical limited company contractor will also face an extra £1000 in Corp Tax from April!
— ITContracting.com (@justcontracting) October 17, 2022
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