The Budget – What it really means.
It’s hard to follow the budget with full attention…let’s be honest, it resembles a late night brawl in a pub at points with all the incoherent moaning and heckling but here’s the most important things we think you should know about.
We’ve been waiting with bated breath to find out what the budget was going to say about this. For those that don’t know, from April 2017 the changes to the public sector contractors meant that the responsibility of falling into IR35 fell onto the end client i.e the agency, client so a lot of contractors were then forced to work inside IR35. This meant that the agency/client wasn’t liable and that, for the contractor, it wasn’t worthwhile working through their limited company’s anymore.
There have been calls for this new legislation to be spread to the private sector, which of course ruffled the feathers for a lot of contractors. Yesterday, it was confirmed that the governments call for this to come into place have been extended to April 2020. This gives contractors at least another year, hopefully more. We’re unsure how they are going to be able to enforce this change so hopefully it will not come to fruition.
Currently Entrepreneurs Relief is available to shareholders of companies that have been trading for 12 months. Entrepreneurs relief is the reduced rate tax of 10% that you can claim when you close your company down. Any reserves/profit left in the company after all liabilities are settled is available for the shareholders to take as a Capital Gain. You are then entitled to claim the Capital gains tax free allowance then claim entrepreneur’s relief on the remaining amount. Following the budget, it’s been announced that the qualifying period to claim entrepreneur’s relief has been increased to 2 years i.e you can’t claim it if your company has traded for less than 24 months.
Tax free allowance and higher rate threshold
As it does every year, from 2019/20 the personal tax free allowance will be increasing from £11,850 to £12,500. Also, on top of this, the higher rate tax threshold will increase from £46,350 to £50,000 gross income. This means less tax and more money in your pocket so nothing to grumble about.
Currently, if you have a annual turnover (in a running 12 month period) of £85,000, you must register to charge VAT. There will be no changes to this next year.