Autumn Statement: Top 5 points for contractors
Top points for contractors to focus on from this year’s Autumn Statement;
1. IR35 and the Private Sector
It’s a lot to digest but the first point refers to the IR35 reforms that were rolled out to the public sector at the start of the tax year 2017/18. There was speculation that this would also be rolled out to the private sector affecting thousands of limited company contractors. Private sector can relax for now as it doesn’t look like these rules will be extended to them until 2019, though there is no official confirmation of a date yet.
2. Compulsory VAT registration threshold
While many speculated and the chancellor did have the option to reduce the VAT registration threshold from its current level at £85,000 he decided to keep it the same for the next two years. With changes to the flat rate scheme introduced at the start of the current tax year, this is beneficial for contractors that don’t cross the VAT threshold and won’t have to register and comply with additional administrative work.
3. Personal Tax Allowance, thresholds and Minimum Wage all increase
From April next year, all contractors will see a benefit from the chancellor raising the personal tax allowance from £11500 to £11850. The 40% tax band will also increase to £46,350. Estimated calculations have been made that contractors would benefit by circa £1,000 a year.
National minimum wage will increase by £0.33 starting next tax year. This would require some umbrella contractors to negotiate a rate increase prior to April 2018.
4. Scale rate subsistence Claims: Receipts no longer required
The chancellor quoted the above changes as “economicky” but it indicates that this will reduce the work for contractors of umbrella companies who claim expenses (food and drink) at HMRC “scale rates”. In most cases, umbrella companies would require contractors to keep copies of their receipts for their expense claims and sometimes audit them. With the changes introduced, contractors will no longer be required to keep expense receipts.
5. Charging Electric vehicles at work: No Benefit in kind
While it is a bit new in the market, contractors with electric vehicles will find this change beneficial. With the government setting aside £400m for electric charging infrastructure and £100m towards grant, this technology is soon to become more and more visible over the coming years. It might be a good point to consider before buying your next car.
Read the full report here.