After endless campaign trails and speculation, May 7 2015 saw David Cameron return to Number 10 and resume his position as UK Prime Minister. We take a look at what a Tory government means for your money, and the plans that might be affecting you as a freelancer or contractor over the next five years:
What we know
• PAYE on all earnings from April 2016 (except mileage).
• Reclaiming expenses process is yet to be defined through PAYE regulations, and will be subject to a new test. If the worker fails the test, they will not be able to claim expenses, potentially including mileage. Test also applies to PSC workers (limited company).
• Workers can reclaim allowable expenses (supported by providers).
• Anti-avoidance rules make for a more level playing field.
• We are not aware of any plans to increase VAT, National Insurance Contributions, or Income Tax.
• The government plans to raise the tax-free personal allowance threshold from £10,600 to £12,500 by 2020, benefitting contractors who are outside of IR35 and on a low salary set-up. This translates to a staggering 30 million households being exempt from paying income tax by this time.
• Plans to increase the 40% income tax threshold to those earning a minimum of £50,000.
• Pledge to increase the Inheritance Tax threshold for married couples as well as civil partners, from £325,000 to £1 million.
• As a result of the coalition coming to an end, ‘Bedroom Tax’ is likely to remain in place.
• Cuts to the Pension Lifetime Saving Allowance from £1.25 million to £1 million are set to take effect in April 2016.
• Jobs tax for under-21s may be abolished making it easier for young people to get their foot on the career ladder.
• A review will be opened into the disadvantages faced by those who are self-employed, including maternity pay, mortgages, and pensions.
What we don’t know yet
• The details surrounding the tests that determine whether an expense can be reclaimed.
• New PAYE regulations that define the reclaim process.
• The scope and timing for a BIS review on the transparency of providers.
• No word yet on whether IR35 will be overhauled under the new Tory government. Stay tuned for more information.