The Chancellors Pre-Budget speech was quite low key which, compared to previous years, was good news for  freelancers and contractors.  For those operating through PSCs there was no mention of reform to tackle income shifting or changes to IR35 which was a relief. More good news was that the proposed increase in corporation tax for small companies is to be deferred, leaving the rate at 21%. 

On the downside employer and employee national insurance contributions will rise by a further 0.5 per cent as from April 2011 which will hit all our clients but particularly umbrella workers since all their income is subject to NI. Income tax on income above £150,000 rises to 50% from April 2010. From April 2012, the point at which 40 per cent income tax becomes payable is to be frozen for a year (£37,400).

Employer pension contributions are to be included in the definition of earnings for pension tax relief purposes but will only affect those earning more than £130,000.

A practical point to note is that VAT returns to 17.5% so invoices raised after 31 December will be plus 17.5%.

To view a full analysis of the Pre-Budget speech please click here.