budget

What does the Summer Budget 2015 mean to you?

Earlier in the week, we talk about some general predictions preceding yesterday’s budget statement by Rt Hon George Osborne MP, our Chancellor in this relatively new Conservative only budget. Predictions included reducing inheritance tax thresholds, reforming ‘non-dom’ status and cutting the benefit bill that the UK is burdened with. Some of the predictions have indeed been announced with more unexpected changes also being announced by Mr Osborne.
In general terms, Mr Osborne gives the impression of a Chancellor set on reform. He announced reforms to the corporate tax system, both in terms of rate reductions and payment times, banking taxation and the income tax system.  But what points were announced in the Summer Budget 2015 that are relevant to you?
In order to assist with putting this into context, some general points of note include:
• The Chancellor announced changes to Tax Credits, the withdrawal of some housing benefits (including for under 21s) and streamlining of rents to market value for higher income households living in social house, all with the aim of reducing the benefits budget
• Tax avoidance will continue to be a focus point for the government, with Mr Osborne announcing increased resources for HMRC to combat aggressive planning
• Sunday trading hours will now be in the control of local authorities
• Students in lower income households (earning below £42,000 pa) in England and Wales will no longer receive maintenance grants at University from next year, and instead can apply for a student loan
• A new National Living Wage, starting at £7.20 in April 2016 and rising to £9 an hour by 2020, replaces the £6.50 minimum wage for those aged over 25.
For contractors, the more specific points of interest include:
• As we anticipated the consultation document on the use of travel and subsistence by workers engaged through employment intermediaries, such as umbrella companies and personal service companies has been announced with a closing date for comments and feedback is 30th September 2015. We will be releasing further comment on this in due course
• Part of the Chancellor’s announced reforms include change to the way in which dividends are taxed. The Dividend Tax Credit, currently 10%, is being removed and replaced with a new tax-free Dividend Allowance of £5,000. From April 2016 dividends will be taxed at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. This will impact upon those contractors operating through their own companies, and we will be working with our customers over the course of the next nine months to ensure that they understand this.
• The currently available NICs Employment Allowance will no longer be available where the director is the sole employee, applicable from April next year.
• In 2017, the rate of Corporation Tax on companies is to be reduced again to 19% and 18% in 2020
• We are expecting the release shortly of a discussion document on how to improve the usefulness of IR35. The government is keen to protect contractors genuinely outside IR35, but wishes to stamp out the unfairness of those acting as ‘disguised employees’, which they believe costs over £400m a year.

Over the course of the next couple of weeks we will be updating our blog with further information as to the consultations and discussions around all relevant issues.  If you have any questions in the meantime, please call our experts on 0207 164 2116.