Chancellor George Osborne, in the last and perhaps most widely-leaked Budget of this Parliament, claimed that 'Britain is walking tall again'.
Promising no 'giveaways or gimmicks' he still succeeded in pulling a few rabbits out of his hat or should we say his red briefcase!
The headlines from Budget 2015 most affecting contractors include:
- An anticipated increase in the tax-free personal allowance from £10,600 in 2015/16 to £10,800 in 2016/17 and again up to £11,000 in 2017/18.
- The threshold at which a person starts paying 40p income tax rises from today's £42,385 to £42,700 in 2016/17 and £43,000 in 2017/18 to ensure higher rate taxpayers benefit fully from the rise in the personal allowance.
- For those who are about to draw or are currently drawing their occupational or private pensions to access their annuities, is has been confirmed that the law is to be changed so that those individual's will not suffer a punitive tax charge.
- For those contractors contributing to their pension pots, the lifetime allowance limit is being reduced from £1.25m to £1m.
- Other personal tax changes include a new Personal Savings Allowance which allows an individual basic rate taxpayer to receive £1000 interest on savings tax-free. For higher rate taxpayers the tax-free amount is £500. This will come into effect from April 2016.
- Drivers will be cheered by the cancellation of the fuel duty rise due in September.
Many contractors will probably also welcome the Government's proposals to abolish the Annual Self- Assessment Tax Return in favour of a 'Digital Tax Account' by 2020 ending the annual rush to file a Return.
For the more indulgent, beer duty has been cut by 1p and that on cider and whisky cut by 2%, whilst the duty on wine has been frozen.
Investors are also being encouraged with an increase in the Annual Savings limit for ISAs to £15,240 together with a new 'Fully Flexible' ISA, allowing savers to withdraw money and put it back later in the year without losing any of their tax-free allowance.
A new 'Help to Buy' ISA is being launched for first time buyers enabling the Government to top up their savings by £50 for every £200 saved for a deposit.
Contractors working in the North Sea will welcome some cuts to taxes affecting oil producers. This was proposed by the Chancellor in a bid to stimulate investment in the area.
The Chancellor also explained the Government's plans for boosting regional growth, including extending enterprise and housing zones and an overhaul of business rates.
The new Diverted Profits or 'Google Tax' spearheads the Government's continued crackdown on tax avoidance and evasion.
As widely predicted the Chancellor has announced a consultation which will consider whether to restrict travel and subsistence relief for workers engaged through an employment intermediary, such as an umbrella company or a personal service company, and under the supervision, direction and control of the end-user. If implemented any changes will take effect from April 2016. The Department of Business Innovation and Skills will consult on these proposals later this year - no date has been given at this time. A similar consultation took place in 2008 which did not result in further action once the effect on the worker and tax revenues was taken into account.
Those workers not supervised and controlled need not worry since they should not be affected even if any changes are made. Those PSC customers who have had an IR35 review and passed already have a robust defence.
Readers beware! With a General Election looming in May there may be even more in the way of fiscal and taxation news later in 2015!
Further details on the budget report can be found here.