The first thing that came to our mind when Chancellor Philip Hammond concluded his spring budget speech was “interesting”. Really – we are serious. Did you know the employment rate in the UK has reached a new record high of 74.6% in the three months to December 2016? Or that there is now a higher proportion of women at work in the UK than ever before? Or that there is a dramatic increase in the number of self-employed professionals?
Yes – the Chancellor kick-started his first and last spring budget speech with some really positive facts but what followed after that invited mixed reactions, including us, despite the clean intentions of Mr. Hammond to support the economic growth of the UK in the best possible manner ever.
Relief on the Corporation Tax
Although this was first announced during the Autumn Statement last November, Hammond once again touched upon the Corporation Tax (CT). He stated that the CT will be 19% for the financial years beginning from 1 April 2017, 1 April 2018 and 1 April 2019, and 17% for the financial year beginning 1 April 2020 - the lowest in the G20.
Class 4 National Insurance Contributions (NICs) to increase
It is a widely known fact that the government will be abolishing Class 2 NICs. But this announcement has raised many eyebrows in the flexible public sector workforce! The Budget 2017 states that the main rate of Class 4 NICs will increase to 10% from 9% in April 2018 and to 11% in April 2019. The step to move self-employed NICs in line with employees - above a certain earnings threshold – has been taken to raise funds to support the UK’s social care system.
Paragraph 1.3 of the Spring Budget 2017 (HTML version) says:
“The main rate of Class 4 National Insurance contributions will increase from 9% to 10% in April 2018 and to 11% in April 2019 to reduce the gap in rates paid by the self-employed and employees, and to reflect the introduction of the new State Pension to which the self-employed have the same access.”
In simple words, the tax-liabilities of contractors earning profits above £16,250 will increase! The Chancellor also mentioned that the dividend allowance will be reduced from £5,000 to £2,000 from spring of 2018 with a view to reduce the tax differential between the self-employed and employed, and those professionals working through a company, to raise funds to support public services.
Parental benefits for self-employed to be consulted on
This is not exactly the first time that the issue of “parental benefits” has arisen but this time the Chancellor specifically mentioned that the government will consult on disparities in parental benefits between self-employed and employed.
Paragraph 4.3 of the Spring Budget 2017 (HTML version) says:
“Alongside Matthew Taylor’s review into employment practices, the government will consider whether there is a case for greater parity in parental benefits between the employed and self-employed.”
Employer demand for skills is on a rise
This is a good sign for all professionals – irrespective of the employment model they are following. The budget states that more steps will be taken to promote skill development and increased productivity for the professionals working in the UK.
Paragraph 2.6 of the Spring Budget 2017 (HTML version) says:
“Over the coming years, 42% of businesses expect to have more jobs requiring intermediate-level skills, and 74% expect to demand more higher-level skills.”
The contractor community sidelined
The focus is on the progress of the UK and offering consultation on parental benefits for the self-employed and doesn’t prove anything. But what about the contractors? We understand that tackling tax avoidance and promoting aggressive tax planning is the need of the hour but the government doesn’t leave the flexible workforce in a very comfortable spot.
The fact that the Chancellor doesn’t even say the words “IR35”, “legislations”, etc. only assures us that the new off-payroll IR35 legislation for contractors working in the public sector will start from 6 April as planned, and this is no joke!
Before you panic and make rash decisions that will hamper your career prospects in the future, let us remind you that Bradleys Contractors is in this with you. We are in the process of making important decisions and if you see our track record, we don’t believe in disappointing our contractor clientele at all!
So stay tuned till then, and if you want to some clarity sooner than later, feel free to give a call to us on 0203 507 0087.