Professional Umbrella Company Budget Assessment
We asked Professional Umbrella company how they saw the Spring Budget impacting contractors.
According to Professional Umbrella “The ‘off-payroll’ rules will mean that where a public sector organisation engages an off-payroll worker, that organisation will be responsible for deducting and paying the associated tax and NICs to HMRC.
“The 5% allowance that was available to reflect the costs of administering the rules will also be removed for those who work in the public sector.”
Contractors Dividend Payments
The next way that the Chancellor and Prime Minister attacked contractors was through dividends. Contractors take as much as they can in dividends.
This means they can save on the higher rate of income tax and National Insurance.
Said Professional Umbrella “With class 2 national insurance contributions (NICs) due for abolition in April 2018, class 4 NICs are to rise from 9% to 10% in April 2018. They will then rise from 10% to 11% in April 2019.”
So, why are the Government doing this?
Equalising Tax Payments Between Self Employed and Employees
According to Professional Umbrella “The intention of this change is to move toward equalising the payments from contractors in comparison with those who are employees”.
That sounds very ominous.
There is still not equality between what an incorporated contractor pays in national insurance and tax and an employee. That’s even after this budget.
So, it looks as if this is just the first instalment. It is their aim to equalise the tax and national insurance contributions of contractors and employees.
So, what else have the Chancellor and Prime Minsiter got in store for contractors?
Contractors Tax Freed Dividend Allowance
Said Professional Umbrella company “The £5,000 tax-free dividend allowance, introduced in April 2016, is to be reduced to £2,000 from 6 April 2018”.
This is the budget where the Chancellor, and Prime Minister, really went after contractors.
It’s the worst budget for contractors since New Labour introduced IR35 in 1999.
Differential in Tax and National Insurance Contributions
Previous Chancellors have hit contractors badly but now it looks as if he, and the Prime Minister, want to completely take away the differential in tax and national insurance contributions paid by permanent employees and the self employed and those using limited companies.
He and Theresa May both believe that contractors should pay the same amount of tax and national insurance as permanent workers earning the same amount of money.
This looks to be just the first instalment towards that goal.
This article is by Porfessional Umbrella. You can find more info about them at Professional Umbrella – the Umbrella for Professionals