Phillip Hammond, The Chancellor of the Exchequer, gave his first Autumn Statement to Parliament this week. Being the first statement since the Brexit vote in June, this year’s statement has long been anticipated to set the precedent for how Britain will position itself outside of Europe. But what changes will affect small businesses, contractors and freelancers?
Autumn Statement 2016 Highlights
The biggest shake up for the contracting industry is the now confirmed reforms to IR35 in the public sector, which is now under the name of Off-Payroll Working. There will be increased responsibilities for potential employers and/or agencies supplying to the public sector on tax due from individuals working for them through personal service companies and similar arrangements.
In April 2017, the tax-free personal allowance will be increased from £11,000 to £11,500 for basic rate (20%) tax payers and the threshold for higher rate (40%) tax payers will be increased from £43,001 to £45,000.
The National Living Wage is also due to rise from £7.20 to £7.50 per hour.
The National Insurance threshold will be increased to £157 for both employees and employers, this is currently £155 per week for employees and £156 for employers.
The tax and national insurance advantages of “salary sacrifice” schemes to be withdrawn, apart from arrangements involving pensions, childcare, cycle to work and low-emission cars.
From the 1st June 2017, Insurance Premium Tax will rise from 10% to 12%.
Changes are to be made to the VAT Flat Rate Scheme for businesses spending less than 2% of their turnover or less than £1,000 per year on goods. This excludes capital goods, food, vehicles and fuel.
As planned, corporation tax is due to fall from 20% to 17% by 2020.
For the seventh year in a row, fuel duty rise has been cancelled. This will save the average car driver £130 and van driver £350 a year.
Plenty to consider and review and as a contracting accounting specialist you can be sure we will be able to support both new and existing contractors with these changes to help maximise future income. Despite some of the concerns voiced in the industry since this announcement, contracting still provides a hugely valuable career for those wanting a strong WorkLife balance. A flexible workforce will no doubt still be in huge demand considering some of the commitments the Government is making in various parts of the economy. Please be assured we’ll continue to be with you all the way as these changes occur.
For a full recap of the Autumn Statement please read our detailed guide.