Yesterday’s Autumn Budget, delivered by the Chancellor of the Exchequer, provided ‘tricks and treats’ in equal measure. It was met with a mixed response from the public, politicians, and the business community alike, with many saying the country’s higher earners were the real winners.
* An increase to the personal allowance, with the threshold rising from £11,850 to £12,500 in April 2019. This is a year earlier than was originally planned and will provide a welcome boost to those on low incomes, especially the low-paid self-employed.
* A rise in the income tax threshold for higher paid workers. The point at which people will start paying the higher 40% tax rate will rise from £46,350 to £50,000 in April 2019. This is slightly different in Scotland, due to Scotland’s devolved powers, click here for further information about Scottish Income Tax.
* Fuel Duty has been frozen for the ninth successive year, which will help to further stimulate investment in growth by businesses.
Freezing fuel duty benefits the economy through increased investment and spending by businesses (especially retailers and transport firms), which generates enough in extra VAT and income tax receipts that it covers the loss of tax income created by the freeze.
* The National Living Wage will also rise to £8.21 per hour in April, from the current £7.83 per hour.
With interest rates remaining very low, it is still a good time to borrow, but don’t expect it to last. There has already been a slight rise in the Bank of England base rate of tax this year and a further rise is expected to follow shortly.
The government is extending the breathing space from legal action from six weeks to 60 days, for those who are struggling with repayment difficulties.
The government will also investigate a no interest loan scheme for those facing a struggle to pay for vital and unexpected housing costs. A similar scheme is already in place in Australia.
The study will take place in 2019, so it could be a while before a pilot scheme is introduced.
With the Bank of England base rate staying low, savers will have to wait a bit longer before they see any real benefits.
The Treasury believes that up to a third of self-employed workers using PSCs are working in the same way as employees. Because of this, the government believe they should be paying more income tax and national insurance, whether that be through their own company or by the company they are contracted to work for.
The rules were changed in 2017 for public sector workers and will be changed for the private sector in 2020 for those working for large and medium-sized businesses. The reforms are designed to stop freelancers working off-payroll so an extra £3bn in taxes can be raised by 2024.
Pushing the much debated and controversial IR35 tax reforms for the private sector back until 2020 does provide another year of breathing space. However, if 2018 is anything to go by, it’ll also be another year of scare-mongering and heated debate.
The announced change effectively means that, even if you are self-employed, if you perform contract work for a larger organisation they will be able to dictate what your tax affairs will look like from April 2020.
So, if you are an IT contractor, or a contract cleaner, courier, or even a freelance business consultant, you could be affected by the reforms. This will leave millions of self-employed workers worrying that they need to pay more tax on their earnings. Some could see their income reduce by up to 25% and be made to pay backdated taxes.
It remains to be seen what the affect will be of the IR35 reforms to the private sector, but if you are self-employed you now have an extra year to prepare and consult with an IR35 specialist to clarify your status for IR35.
The announcement has also bought the government and HMRC and extra year to iron-out any issues, this could include improvements the CEST tool, which has been heavily criticised in the press. Whatever happens, one thing is for certain, IR35 WILL be rolled-out to the private sector whether the self-employed like it or not.
BREXIT, as some predicted, was little mentioned in the Chancellors Budget. With key points still to be discussed and agreed by the government and the European Union, it would have been premature to make any announcements that may have become subject to change shortly afterwards.
There was confirmation of a 1.2% rise in public spending, most of which (£20.5bn over the next five years) will go into the NHS.
There will also be a minimum extra £2bn a year for mental health services. New mental health crisis centres will provide support in every A&E unit in the country.
There will be £10m for air ambulances, plus an extra £700m will be provided for councils to care for the elderly and those with disabilities.
* There will be an increase of work allowances of £1.7bn for universal credit, which would protect claimants moving to the new systems. A further pledge of £2.7bn would save millions of families £630 a year.
* A 30% growth in infrastructure spending and £30bn package for England’s roads for repairs to motorways, and potholes was welcomed. With Britain’s roads increasingly resembling swiss cheese, how far that money will actually go towards improving the roads remains to be seen.
* The environment will benefit from a new tax on plastic packaging which does not contain 30% recyclable material as well as £60m towards the planning of new trees in England and £10m to deal with abandoned waste sites. However, there was no new tax announced for takeaway coffee cup, but this will be reconsidered if significant progress in this area isn’t made by the industry.
* A new Digital Services Tax on the established tech giants was announced for April 2020, for those businesses generating more than £500m in global revenues. The tax is currently being consulted upon, by will be made against revenues from advertising rather than against sales and is aimed at social media, search engines and online marketplaces.
Because the 2% tax will be levied on revenue it is designed not to be passed on to consumers. It could however force a rise in advertising costs to businesses.
Let’s not forget that Mr Hammond stated last week that if there was a ‘no deal’ BREXIT, the Budget would have to be re-thought. This could mean the Spring Statement becomes a Spring Budget in 2019… watch this space!