After all the goings-on of the last six weeks, Budget 2016, which took place in the middle of March, seems a lifetime ago.
Despite this, and despite the fact that then-Chancellor of the Exchequer George Osborne has since been replaced by Philip Hammond at the hands of new Prime Minister Theresa May, all of the tax changes (or upcoming tax changes) for contractors that were underlined by Mr. Osborne at Budget 2016 still hold the same weight as they did before the Brexit vote.
For a more detailed look at the ins and outs of Budget 2016, you can read our key takeaways for contractors, companies, and individuals. For now, here are five of the most important contractor tax changes you should be thinking about right now:
Capital Gains Tax (CGT) Reduced to 20%
In a huge boon to tax payers across the income spectrum, from April this year CGT was reduced from 28% to 20% for higher rate tax payers, and from 18% to 10% for basic rate tax payers. This change doesn’t apply to gains made from residential property however, which remains at its former rates.
Travel and Subsistence Tax Relief Scrapped for Some Contractors
With contractors facing the prospect of mandatory IR35 testing from April 2017, Travel and Subsistence tax relief between your home and your working location was scrapped in April for temporary contractors working through intermediaries, such as umbrella companies. Contractors whose work doesn’t fall under IR35 may still claim the relief.
Contractor Class 2 National Insurance Contributions Discontinued
Though the details are still somewhat cloudy, what we do know is that from 2018 Class 2 National Insurance Contributions for contractors will be discontinued, potentially saving contractors making a profit of £5,965 or more per year £2.80 per week. We say potentially because there’s a good chance that some, if not all, of this cost will simply be transferred to your new Class 4 National Insurance Contributions.
£1,000 Allowance for ‘Sharing Economy’ Workers
Touched upon in detail five months ago, with the government having recently recognised that traditional taxation methods don’t work for new-age contractors who are earning small and one-off payments as part of the sharing economy, a new tax-free allowance of £1,000 a year is to be introduced for those earning income through both through trade and property (Airbnb hosts rejoice).
Removal of National Insurance Employment Allowance
In a topsy-turvy turn of events, the withdrawal of the National Insurance Employment Allowance for contractors acting as single-person companies is set to go ahead, while Entrepreneurs’ Relief for multi-owner companies is set to be restored. Entrepreneurs’ Relief will also be offered to external investors in unquoted companies, though the details of this arrangement are still being consulted on.
Experienced Contractor Accountants
To speak with a professional accountant to discuss how these tax changes may affect 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.