Tax Changes and the Self Employed
Personal Service Companies
Most people feel that anything to do with tax is a minefield, and rightly so! There are big changes on the horizon for many this year , and self employed workers are no exception. There will be legislation alterations and investments in new systems and several of the adjustments will leave some of us feeling less than enthusiastic. In an effort to tackle tax avoidance, a clamp down is planned for those using their own limited companies to complete work for public sector clients. Tax liability will shift to the departments or agency rather than the contractor.
However, there could be problems with this, as independent specialist contractors may be discouraged and replaced by expensive consultancies. These changes are intended only for the public sector, but there are fears about the rules eventually being applied to the private sector.
There will probably be disappointment amongst the majority of freelancing Mums in the UK, who amount to 270,000, as again they will not receive the same maternity pay as employees. Recommendations to bring the two forms of maternity pay to the same level were made after the recent Self Employment Review, but evidently to no avail. This type of work aids parents and allows them to organise their work and home life, while easily balancing and integrating parenting responsibilities into their schedule.
Corporation Tax and Personal Allowance
People working for their own limited company will benefit from a proposed reduction in Corporation Tax to 17%. This is set to happen by 2020, and in 2017 personal allowance will be raised to £11,500.
Abolition of Class 2 NICs
The abolition of Class 2 NICs will simplify the tax system for millions of sole traders as well as saving them around £134 a year.
Infrastructure Spend and the Northern Powerhouse agenda
Large-scale infrastructure projects are hoped to boost productivity within the UK, helped by the self employed with their skills and talents. This is of course assuming that rules regarding PSCs in the public sector, do not stand in the way of progress, and impact on the Governments delivery time and budget.
Tax Increases on Insurance Premiums
Paradoxically while the Government asserts its intentions to support small businesses, it has announced changes related to insurance premium tax. These changes are likely to increase the cost of insurance policies, and result in larger overheads for small businesses. Insurance is one of the biggest issues for this type of business owner, and one that could have done with being addressed.
The Lifetime ISA puts to bed many of the fears about being penalised due to fluctuating income, and is one of the more welcome aspects of the latest budget. People will find it easier to remove money and replace it later without any negative comeback.
Fuel duty freeze
Once again fuel duty has been frozen, which will assist the self employed, many of whom need to travel extensively on business. The announcement sees fuel duty remaining the same for the last 6 years, meaning a positive outcome for company owners who wish to keep their costs down.
Previous article: Workplace Pension Schemes and Automatic Enrolment