Following on from this morning’s summary on the key talking points from Budget 2016 for individuals, below we’ve summarised the key talking points for contractors from Chancellor of the Exchequer George Osborne’s eighth full Budget.
Keep an eye out for our article summarising Budget 2016 for small and medium-sized businesses (SMEs), coming later today.
New Tax Allowances for ‘Sharing Economy’ Workers
One of the biggest takeaways from Budget 2016 from the point of view of contractors was that the Chancellor has, finally, recognised how traditional taxation methods have been having a negative impact on contractors earning small and one-off payments as part of the sharing economy.
Speaking to the House of Commons, Mr. Osborne said:
“We’re going to help the new world of micro-entrepreneurs who sell services online or rent out their homes through the internet. Our tax system should be helping these people so I’m introducing two new tax-free allowances each worth £1,000 a year, for both trading and property income.”
The Chancellor continued by noting that there will be no forms to fill out in order to benefit from this tax break, before claiming that at least 500,000 people will benefit from this change.
Class 2 National Insurance Contributions for the Self-Employed to be Scrapped
The other big announcement, from the point of view of contractors, was that Class 2 National Insurance contributions (NICs) for the self-employed are due to be abolished from April 2018 in favour of the benefits of Class 2 NICs (primarily entitlement to the State Pension) being combined with the benefits of paying Class 4 NICs.
Currently costing contractors and self-employed individuals making a profit of £5,965 or more per year £2.80 per week, from April 2018 you will only be required to pay Class 4 NICs, though it is unclear whether the current weekly cost of Class 2 NICs will transfer directly to the new Class 4 NICs.
Business Rates Abolished for Properties With Value up to £12,000
One of the biggest talking points from Budget 2016 was that of business rates being abolished for all business (commercial) properties with a rateable value up to £12,000, from April 2017. There will also be a ‘tapered’ relief rate on properties between £12,001 and £15,000.
With the current relief rate set at just £6,000, this poses a hugely beneficial increase for small businesses and contractors working from a commercial space. The government estimate that under the new rules 600,000 small businesses will pay no rates at all.
Personal Allowance to Increase to £11,500
Touched upon in this morning’s key talking points for individuals summary, and seen equally as a boon for contractors, from April 2017 the personal allowance will increase to £11,500 (after rising to £11,000 next month).
The personal allowance was just £6,500 when the Conservatives were elected six years ago, displaying an almost 100% increase.
Understanding Budget 2016
To speak with a professional accountant to discuss the impact of Budget 2016 on you as a contractor, or for anything else, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.
If you’re interested in the Budget 2016 changes and the impact they’ll have on you, feel free to check out our other pieces on the impacts of George Osborne’s changes: