Budget 2020 – Off-payroll changes will go ahead on April 6th

Today’s Budget confirmed that the April IR35 reforms will go ahead as planned. A series of smaller, positive announcements won’t make up for the seismic off-payroll changes, which are causing chaos at a time of unprecedented uncertainty.

Alongside significant emergency funding to help businesses and individuals with cashflow problems during the Coronavirus outbreak, Rishi Sunak also announced a massive increase in spending on infastructure projects.

These are the main points from the Budget which directly affect contractors and other small business owners:

Budget 2020 – Main Announcements

• IR35 – the off-payroll changes will be going ahead, as planned, even though no mention was made of the reforms during Rishi Sunak’s speech. Page 88 of the Red Book states: “The government believes it is right to address the fundamental unfairness of the non-compliance with the existing rules, and the reform will therefore be legislated in Finance Bill 2020 and implemented on 6 April 2020, as previously announced.”
• Entrepreneurs’ Relief – the lifetime limit will be reduced from £10m to £1m. The Chancellor says he considered abolishing the incentive altogether, but slashing the limit is expected to help genuine entrepreneurs. This will literally be a relief for contractors considering closing down their companies.
• National Insurance Contributions – the starting threshold rises from £8,362 to £9,500 for the 2020/21 tax year. The Government’s eventual aim is to increase the threshold to £12,500.
• The Employment Allowance will increase from £3,000 to £4,000 per year, however, this won’t benefit most contractor limited companies, who are either ineligible and/or have negligible NIC bills.
• Corporation Tax will remain at 19%, and won’t be reduced further to 17%, as suggested in previous Budget announcements.
• During the Coronovirus crisis, the Government will pick up the bill for Statutory Sick Pay (SSP) for firms with 250 or fewer employees, however this will be a big concern to umbrella companies, who will have to foot the bill themselves. How will they fund any potential claims? We expect limited company contractors will be able to claim SSP and reclaim it at a later date – possibly via payroll. Details will be available soon.
• The flat rate for Use of Home as Office is set to increase from £4/week to £6/week. You can claim this allowance without providing receipts, to help fund household expenses. A small, but welcome increase.
• You can access the official HMT Budget page here (which includes related documents).