Tough times ahead for the self-employed
Joanne Thorne, Technical Compliance Manager at SJD Accountancy comments:
“Spending cuts and tax hikes are a simple way for the Chancellor to start to plug the gap in the UK’s finances, but it will be the self-employed who feel the pinch of these most acutely.
“The cutting of the Capital Gains Tax threshold, which is the tax paid on any profit gained when selling an investment asset, such as a property or shares, offers a quick fix to raise money for government coffers.
“Halving the tax-free allowance from £12,300 to around £6,000 in 2023 and to £3,000 by 2024 could impact individuals across the board. However, this move is another blow to Limited Company Directors who may have built this tax efficiency into their company exit strategies. Many may now be forced to reconsider any exit strategy they had previously put in place.
“With confirmation that the Chancellor is also cutting the £2,000 tax-free dividend allowance to £1,000 by next year and halving it again to £500 by April 2024, alongside existing increases to both the dividend tax rates (by 1.25 per cent), and Corporation Tax from next year make today’s statement a triple whammy for Limited Company contractors.
“It’s disappointing that the contracting community continues to battle for financial security after a difficult few years, and government policies seem to overlook the valuable role they play in the UK economy.
“The Chancellor described this as a ‘balanced plan for stability’ but what we have seen today with these policy changes is a combination of squeezing and freezing. There is no doubt that tax planning in the years ahead for every self-employed individual will be absolutely essential.”