2013/14 Budget Report Summary
With the latest Budget recently being announced, there are changes being made that will have an affect on everyone in the country, including contractors.
Of course there will always be positives and negatives for everyone when it comes to the various changes within the country. Here is a summary of how the Budget will affect contractors and their working practices…
Firstly, in terms of employment, employment-related taxable cheap loans will be increasing from £5,000 to £10,000 from the tax year 2014/15. The government will also be looking to introduce an allowance of £2,000 per year for all businesses to be offset against their employer Class NIC liability from April 2014 – this will then be claimed as part of the normal payroll process through Real Time Information (RTI).
Changes to income tax is another important area that contractors need to be aware of… Starting from April 2014, personal allowance is set to rise to £10,000 (from £9,440 – 2013/14). This means that the average taxpayer will actually be better off by £112, and this will continue to rise in line with CPI from April 2015.
There will also be slight changes made to National Insurance contributions. In 2012/13 the first £146.00 a week was not subject to Employees NI, in 13/14 this will move to £149.00, so you will be £18.72 better off a year. Also, employers NI secondary threshold moved from £144.00 in 12/13 to £148.00 in 2013/14, meaning businesses are £28.70 better off a year.
The higher rate 40% tax band will increase from 2014/15 as the threshold is increased by 1% from £41,450 (2013/14) to £41,865. And, from April 2013, the 50p top rate of tax will be reduced to 45p, with a dividend rate of 37.5% (30.56% effective rate).
With regards to the possible IR35 changes that were suggested late last year, the government will make a small alteration to the existing IR35 provisions to equalise the tax and NICs treatment of office holders, and put beyond doubt that the legislation applies to office holders for tax purposes. However, this new legislation has not yet been released.
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