On Wednesday 8th March 2017, Philip Hammond
delivered his first Budget.
So, what are the key outcomes?
off-payroll working in the public sector
It is confirmed that from 6th April 2017,
agencies will be responsible for determining the IR35 status for public sector
assignments. This is ultimately the responsibility of the agency even though
the public body should provide their decision on whether it is inside or
outside IR35. Those deemed inside IR35 will have tax and National Insurance
Contributions deducted at source.
Unfortunately, the PSC
5% tax free allowance is also being eliminated to simplify the administration
of the reformed rules and reflect the transfer of responsibility.
HMRC have released
the online Employment Status Service tool (ESS) to provide an IR35 status
decision. The tool is essentially a set of questions that need to be answered
around the working practices of the engagement and will determine if a
worker on a specific engagement should be classed as employed or self-employed
for tax purposes.
flat rate VAT scheme
The government also
confirmed the introduction of a new 16.5% rate from 1st April
2017 for businesses with limited costs such as labour-only businesses which are
most contractors. The new flat-rate VAT rate of 16.5% will apply to a 'limited
cost trader' where the costs of goods purchased is less than 2%
of turnover or less than £1,000 a year.
This will affect most
contractors and will mean that any 'profit' from the flat rate VAT scheme will
National Insurance Contributions (NIC)
Class 4 NIC rates for the self-employed will increase by 1% from
April 2018 from 9% to 10%. This will increase by a further 1% from April 2019.
The dividend tax
free allowance will decrease from £5,000 to £2,000 from April 2018.
personal tax free allowance
allowance will increase from £11,000 to £11,500
from 1st April 2017.
rate tax threshold is increasing from £32,000 to £33,500.
April, Corporation Tax will fall to 19%. By 2020, Corporation Tax will decrease
further, reaching 17%.
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