And other attacks on small business
The Chancellor of the Exchequer has delivered the final Spring Budget. This is not the first time this has been attempted however. Twenty four years ago, Norman Lamont, made the same announcement only to be sacked ten weeks later!
Listening to Philip Hammond, at times one did wonder if this was not a Labour budget given the measures designed to make small businesses pay more tax.
Dividend tax allowance
As from 6th April 2018 the tax-free allowance will be reduced from £5,000 to £2,000. This will mean that director-shareholders will pay an extra £225 on their dividend income. Apparently, Mr Hammond believes this will help deter businesses incorporating purely for tax motives. What he fails to appreciate however is that contractors don’t automatically choose to form their own companies but rather this is driven by large corporates and the public sector who won’t deal with them in any other form. Yet it is far simpler to whack the small businessman rather than ruffle the feathers of the government’s friends in high places.
Class 4 NIC
This NIC charge on self-employed business profits (not corporates) above a certain limit will increase from 9% to 10% in April 2018 and to 11% in April 2019. With the abolition of Class 2 NIC next year, this necessitates the Chancellor closing the NIC gap between the self-employed and the employed, particularly as the self-employed have, since April 2016, been able to access the same State Pension as employees.
The 2015 Tory manifesto said, “A Conservative Government will not increase the rates of VAT, income tax or National Insurance in the next Parliament”. Never trust a politician!
Given that the Class 4 NIC charge is to rise to 11% in two years and tax on dividends falling in the basic rate band is only 7.5%, how is this going to make incorporation less attractive?
VAT thresholds
From 1st April 2017, the VAT registration threshold will increase from £83,000 to £85,000 and the deregistration threshold from £81,000 to £83,000.
Benefits in kind
The government is considering how the tax system could be made fairer and more coherent, including looking at the taxation of benefits in kind and employer expenses. Consultations will be made in respect of:
- Taxation of benefits in kind
- Accommodation benefits
- Employee expenses
Rent-a-room relief
Rent-a-room relief that enables owner-occupiers and tenants to earn up to £7,500 tax-free per tax year from the letting of furnished accommodation in their home is to be redesigned to ensure that it is better targeted to support longer term lettings. A consultation paper will be published later.
Making Tax Digital
Unincorporated businesses with a turnover below the VAT threshold will be given a further year’s grace, ie until April 2019, to prepare for digital record keeping and quarterly updates. Limited companies are still on course to join MTD in April 2020.
There were no other major changes to the business tax regime.
“…at times one did wonder if this was not a Labour budget …”
NO it was a TORY budget, as were the previous ones that hammered contractors.
When a decent opposition surfaces I hope people remember that.
It’s basically a case of out-of-touch-spendspenspendtaxandspend-generic-party-1 vs out-of-touch-spendspenspendtaxandspend-generic-party-2, at present. With Tories and Labour interchangeably filling this role.
Yeah, but you expect this from Labour.
Coming from the Tories, this is a stab in the back.
So much for backing enterprise in the run-up to Brexit.
Oh I’ve given up on the Tories. I’m a small government, free market type of person. They’re a perpetual disappointment. Worse than Labour at times, and that is saying something.
And let us not forget the following;
IR35 – when in opposition Mr Osbourne said he would scrap it when the torlies came to power
Then there is VAT raised from 15% to 17% then to 20%
Then there is IPT which has double in less than a few years to 12%
Then there is the Private Sector Change for tax and NI which will come into force this April
Voted labour till got disillusioned with the policies then Maggie T gave us small guys a chance to think big … I bought into it big time.. and it worked voting Concervative was magic for us contractors and how we made the digital economy work.!!.. fast forward 25 years .. now we are being asked to believe that we are just ‘kelly girls’ working as office minions as the goverment thinks of ways to crush all contractors into PAYE .. well i can only say ‘come the revolution April 1st’ that any one with any sense will not work for the private sector anymore and the skill base will shrink to such levels that HMRC collection and databases will crash and all those goverment d”k heads will realise that mabey they have got it wrong
work for the “private” sector – you mean “public” sector!
Yes Dave Pubic Sector ..
Let’s encourage everyone to buy a diesel car
Let’s ban diesel cars or increase parking
Let’s encourage small business
Let’s penalize small business
Let’s say we won’t increase tax/ni
You know the rest…
One word: sickening
and also Auto Enrollment – wow for two employees of a Ltd company.
and Mr Gauke vociferously opposed the legislation before coming into office
I did have an audience with my Tory MP about the concerns of last years budget and eventually I received a reply from Mr Gauke. It read as though it from a labour MP.
Also lets not forget that the retro taxes imposed by the Torlies
Anyone remember the following?
My Gauke when in opposition was a critic of retrospective taxation,
Gauke is a loathsome creature. This is the guy who hired a bunch of psychopaths to craft letters which have the intent of causing clinical stress for the recipient and force them to pay up even if they had broken no specific tax law. People have committed suicide as a result. What made it even more sickening is that company he hired to write the letters runs an EBT scheme for its employees!
The Tory Party makes me puke. There is no doubt they are only there to look after the uber rich.
Disappointed! Especially given these measures are on top of the imminent changes to Flat Rate Vat. As I drink a couple of pints of home-brew to help soothe the pain I’m asking myself:
1. Why did I take the risk of setting up as a contractor?
2. Why did I vote for the Tories?
3. How do I approach my clients to let them know I have to increase my day rate.
Other contractor sites report a collective sigh of relief that the public sector “off payroll” rules of deductions at source have not been extended to the private sector, stating that the net of CT reductions and dividend increases are by far the worse of the two evils.
Someone commented that being “self employed” is not a choice but a requirement of the “end client”. Yet if this trend of punitive changes on the contractor makes it an unlevel playing field to be a contractor, then would this not force “end clients” to employ? Would, ultimately, the supply of contractors simply dry up as the individuals seek employment elsewhere?
Is the cost of being a contractor still worth the benefits?
If so, then contractors will continue to be a soft target for government.
As expected yet more shabby and thoughtless attacks on contractors in this budget. One way of having a go at “them” so to speak, is deregister from VAT if you are going to turnover less than 83K, i.e. don’t be a tax collector too if at all possible!
I warned my fellow contractor colleagues a few years ago after the draconian APN larceny was introduced that this would be the thin end of the wedge for the whole contracting industry. First they came for the contractors using EBTs, but everyone using Ltd’s scoffed and said “serves ’em right”.
The Tory party has been actively pillaging middle-class free lancers for the past 8 years. The only people who are exempt from the pillaging are the likes of Osborne, Gauke, Cameron et al. Their tax planning ‘works’ because of who they are not because it has any more merit than one’s used by us plebs.
The Tories really are the stupid party. They have repulsed their core vote in the same manner as Labour did with theirs. If Labour is smart they should ditch Corbyn for David Milliband and the Tories will be toast at the next election.