Here are the main points from today’s Budget – with particular reference to those changes which affect contractors and the contracting industry as a whole.
- The economy grew by 2.5% in 2014, and is expected to continue in a similar pattern – between 2.3% and 2.4% over the next four years.
- Inflation may fall to as low as 0.2% during 2015, as a result of a fall in global oil and food prices.
- The personal allowance will rise from £10,600 (April 2015) to £10,800 (April 2016) and to £11,000 (April 2015).
- The pension saving lifetime tax allowance will be reduced from £1.25m to £1m.
- The main rate of Corporation Tax (for profits of £300k or more) will fall to 20% from this April, making it align with the small profits’ tax rate paid by most contractor limited companies.
- A new personal savings allowance is to be implemented – the first £1,000 / £500 in interest will be free of tax for basic rate / higher rate taxpayers.
- Class 2 National Insurance will be abolished over the next five years (this is paid by the self-employed – including freelancers – but not umbrella / limited company contractors).
- The Self Assessment Tax Return (SATR) will be replaced by a more flexible digital solution which will enable taxpayers to submit their income details via a number of different methods, pay when they like (before the deadline), and pay by installments. The new regime is expected to go live by 2020.
- Upon initial inspection, no mention was made of IR35 at all in the Budget documentation.
- The Government plans to restrict travel and subsistence tax relief to workers who are under the ‘supervision, direction and control of the end-user’ – in response to concerns that some payroll companies have been abusing overarching contracts of employment to avoid paying tax (see page 61/62 of the Budget Document). Read more in our dedicated article.
- Further measures to clampdown on tax avoidance will be announced shortly, and are expected to raise over £3bn per year.
- £4 million will be provided to a new Video Games Prototype Fund over the next 4 years, and tax relief will be extended for film makers.
- The rules governing Entrepreneurs’ Relief, which can be claimed by business owners when selling eligible shares in their businesses, are to be tightened to ensure that it is only available “to those selling genuine shares in businesses.”
- The Oil & Gas industry will receive support worth £1.3bn in tax cuts and incentives.
- A new ‘Help to Buy ISA’ will reward savers who deposit up to £200/month towards a first home. The Government will boost these savings by 25%, up to a maximum bonus of £3,000. You can download a dedicated factsheet here.
- The Chancellor didn’t mention a further extension of the Annual Investment Allowance (AIA), which enables firms to write off the cost of eligible plant and machinery costs against their tax bills. It currently stands at £500,000 p.a, but may fall to a mere £25,000 from January 2016 unless a further extension is made.
- Fuel duty will remain frozen for the whole of 2015 – which is, apparently, the longest freeze for two decades.
- You can download the full Budget 2015 documentation here (PDF).