Another year, another Budget. With just 50 days to the next general election, and potentially the last one to be delivered by the current government, this was always going to be a Budget that would be much anticipated.
Mr Osborne presented this year’s Budget as the one that “backs the self-employed [and] the small business-owner.” But how?
Here we take a look at the key measures that you need to be aware of:
Umbrella companies: travel and subsistence avoidance
Umbrella companies and agencies who abuse reliefs on tax and subsistence will come into the firing line of the government’s new anti-avoidance plans.
The use of overarching contracts of employment that ‘permit’ some contract workers to claim tax relief on home-to-work travel expenses will be reviewed. Strict rules governing travel and subsistence will be likely to come into force very soon.
Those contractors, who work under the supervision, direction, and control of their client, walk a fine line between being classed as ‘employed’ or ‘self-employed’. Under the new rules, they are likely to lose tax relief on travel and subsistence expenses from April next year.
This would result in a vast majority of those contractors; who currently use umbrella companies, being considerably worse off than before.
The traditional annual return is to be abolished
Mr Osborne recognised that completing an annual return is “costly, complex and time consuming”. Plans were confirmed on Wednesday for the traditional annual return to be a thing of the past, with a digital on-going management solution to be introduced in its replacement.
The same information will still need to be collected by the taxman. However, an online avenue will certainly help contractors to move with the times.
Class 2 National Insurance contributions (NICs) to be scrapped
Further consultations are to be announced however, what we do know, is that the removal of Class 2 NICs could save contractors as much as £143 a year.
Simplifying the tax systems will make it easier for the self-employed who currently pay both Class 2 and Class 4.
Increased income tax allowances
The income tax allowance will rise, as predicted, to £10,600 on 1st April followed by a rise to £11,000 in the tax year 2017-18.
Introduction of personal savings allowance
A new personal savings allowance will be available to remove tax on up to £1,000 for savings income for basic rate taxpayers and up to £500 for higher rate taxpayers, from 6th April 2016. However, additional rate taxpayers will not receive an allowance.
Fuel duty to remain frozen
Mr Osborne proudly declared that motorists will save “£10 off a tank with the Tories”. This comes as a result of plans to continue the freeze on fuel duty, making it the longest freeze since 1995.
The government will negate tax avoidance by closing the loopholes that currently exist, ensuring that relief is only available for “those selling genuine shares in businesses”.
The Help to Buy ISA
Contractors taking their first step onto the housing ladder will receive further support under the government’s introduction of the Help to Buy ISA.
Under the new plans, for every £200 saved for a deposit, the government will provide a bonus amount of £50. This bonus is capped once the home owner has saved £12,000, meaning the government’s bonus could be be as much as £3,000.
More flexible ISAs
Further to the above, from autumn 2015, any contractors who invest into an ISA will be able to withdraw and replace money from their cash ISA without losing their annual ISA subscription limit.
Oil and Gas workers to get greater benefits
The government has announced a £1.3bn investment and a series of tax measures designed to reignite the sector. These interventions could boost expected North Sea oil production by 15% by the end of the decade.
So was the Budget good or bad news for contractors?
On the whole, the Budget was good news for the contracting sector. After five years of austerity measures and squeezes on public spending, which is due to end a year ahead of original plans, this year’s Budget has been welcomed by many.
Whilst it would be prudent to be aware of the carrot dangling that all government’s use in a bid to win over undecided voters ahead of the election, this year’s Budget will have an overall positive effect on contractors.
Maybe Mr Osborne’s “Britain is walking tall again” declaration is not as self-adulating as many initially thought?