The Chancellor, George Osborne, yesterday gave his final Autumn Statement before the next General Election.
The Chancellor was upbeat about the long term future of the economy and spoke about supporting economic growth whilst reducing the deficit. The Chancellor recognised that the Government needed to support hard working individuals which is reassuring for our contractors to hear but there weren't a huge amount of measures introduced that could be said to affect contractors directly.
Those that do include:
- The personal tax allowance will increase to £10,600 next year, instead of increasing to £10,500. The higher rate tax allowance increases for the first time in five years to £42,385 next year, with a target of reaching £50,000 by 2020
- Stamp Duty is to be reformed, with the 'residential slab system' being abolished and replaced with a sliding charge: 0% up to £125,000, 2% up to £250,000 and 5% up to £925,000
- Devolution of corporation tax setting powers to Northern Ireland's government could lead to contractors based in the country enjoying different and possibly lower rates of tax to compete with the low rates in the Republic of Ireland
- A package of £45m to support exporters with a focus on first time exporters, could include measures to help contractors develop client networks overseas
- The proposed investment in infrastructure, such as roads and flood defences, will directly benefit the engineering and construction sectors, and is likely to support new contracts for engineering and construction contractors
- ISA thresholds will increase to £15,240 from April 2015
- A freeze in fuel duty will benefit contractors commuting by car
- Contractors with younger children should enjoy savings on Air Passenger Duty. Under-12s will be exempt from 1 May 2015 and from March 2016, this will apply to under-16s.
- If a contractor or their spouse dies, the surviving spouse will inherit any ISA savings and the savings will retain their tax-free status. Previously, the savings would revert to being taxed
- The 55% death tax that is passed on to family will be abolished
As always there was reference to maximising tax revenues and dealing with non-compliance. Contractors running their own limited companies will be relieved to note that there was no mention of changes to IR35 rules (which are already complicated enough) or to review employment status generally.
Umbrella contractors may have noticed that the Chancellor announced a general review of travel and subsistence schemes (including those used by umbrella companies) and specifically stated that 'the Government will stop tax relief from being claimed on reimbursed business expenses when they are paid in conjunction with a salary sacrifice scheme'. This is consistent with previous statements from Treasury and HMRC on 'pay day by pay day models' which use salary sacrifice to take salaries below minimum wage so this is nothing new.
It should be noted (and this is missed by many commentators) that compliant umbrella companies such as PayStream do not use salary sacrifice schemes. PayStream both contractually and in practice guarantees the payment of national minimum wage to contractors and provides support and employment rights to contractors which is consistent with the Government's objective to protect workers.
Julian Ball, Legal Director of PayStream commented "We welcome any action to stamp out non-compliant schemes and are fully committed to working with HMRC and Government to ensure that contractors enjoy the benefits of being an employee, claim only appropriate expenses and pay the correct amount of tax. This benefits both the contractor and HMRC."