Chancellor Philip Hammond presented his Autumn Budget 2017 to the House of Commons on Wednesday, 22nd November 2017. It outlines the government’s plans for spending, borrowing, taxes and other fiscal measures. Please find below a summary of highlights and key announcements we think are most relevant to contractors and freelancers in the UK. Please note that this is not a comprehensive summary of the budget. Full details of the budget document can be found here.
IR35 reform is arguably the most anticipated topic in the contractor industry, especially for those who are working in the Private Sector. Unfortunately, the government is still looking at extending the reform to Private Sector. Nonetheless, the silver lining is that instead of claiming the reform in the Public Sector as a huge success (as per HMRC last month), the government is now going to hold further consultations, giving the industry sufficient time to assess before making a conclusive decision.
- No off-payroll rollout to the private sector YET
- Consultation document expected in 2018
- Consultation document announced in response to the Taylor review but no date has been set as to when it will be published.
For more detailed coverage on this topic by our expert IR35 partner, Bauer and Cottrell can be found HERE.
Below are key points and highlights from the Autumn Budget 2017 that you need to know as a contractor.
Personal taxation, NIC and dividend allowance
- Tax-free personal allowance on income tax will increase to £11,850 from April 2018, meaning an additional annual tax-free income of £350 before one is subject to income tax.
- Higher-rate tax threshold will increase from £45,000 to £46,350.
- Both class 1 employer and employee NIC threshold will also raise to £162 per week from April 2018, an extra £260 per annum before employer and employee NIC kick in.
- However, tax-free dividend allowance will drop from £5,000 to £2,000.
- National living wages will increase by 4.4% to £7.83 from April 18.
- For sole traders and the self-employed, the abolishment of class 2 NIC will be delayed until April 2019.
- The 0% band for the starting rate of savings income will be retained at its current value of £5,000.
- The ISA subscription limit will stay at £20,000 but the annual subscription limit for Junior ISAs and Child Trust Funds will be uprated in line with the Consumer Prices Index to £4,260.
- Capital gain tax annual exemption for individuals will increase to £11,700 from £11,300.
- The introduction of a 30-day payment window for gains on residential property disposal until 2020.
- VAT registration and deregistration threshold will not be uprated until 31 March 2020, hence the registration and deregistration threshold will remain at £85,000 and £83,000 respect for the next two years.
- Corporation tax remains at 19% for three years, then 17% from 1 April 2020.
- Qualifying research and development expenditure tax credit will increase from 11% to 12% from January 2018.
Property and Landlords
- Stamp duty for first-time buyers purchasing properties worth up to £300,000 has been abolished immediately in England, Wales and Northern Ireland.
- For first-time buyers in expensive areas such as London, the first £300,000 of a £500,000 purchase will be exempt from stamp duty. Then only 5% on the remainder of the purchase will be charged. However, no relief will be available where the total consideration is more than £500,000.
- Councils can charge 100% council tax premium on empty properties.
- Landlords will have the option to use a simpler fixed rate deduction for every mile travelled by car, motorcycle or goods vehicle for business journeys rather than having to calculate actual expenses incurred, such as fuel.
- From April 2018, only 50% of mortgage interest paid will be eligible for tax relief on rental income. The remainder will be eligible for a basic rate deduction.
Tax Avoidance and Evasion
- Finance Bill 2017-18 will introduce new anti-avoidance rules that relate to the taxation of income and gains accruing to offshore trusts. This measure will affect individual UK residents receiving an indirect payment or benefit from the trust.
- To tackle disguised remuneration, the government will legislate in the Finance Bill 2017-18:
- to introduce the close companies’ gateway. This aims to tackle disguised remuneration avoidance schemes used by close companies to remunerate their employees, and directors, who have a material interest. This change will take on and after 6 April 2017;
- will require all employees, and self-employed individuals, who have received a disguised remuneration loan to provide information to HMRC by 1 October 2019.
- The government is determined to continue tackling tax avoidance schemes. Thus, consultation on a proposal is required of businesses or intermediaries creating or promoting certain offshore financial arrangements. They must notify HMRC of these structures and the details of their clients using these arrangements between December 2016 and February 2017. A response to the consultation will be published on 1 December 2017.
- The time-limit for assessing offshore non-compliance cases will be extended to at least 12 years, with a consultation on this in Spring 2018.
- A discussion document will also be published in 2018 on tax avoidance and abuse of the insolvency regime such as the use of phoenixism.