What will 2016 mean for limited company contractors?
2015 was a big year for contractors, with a mixed bag when it comes to the changes that the government have made to the legislation which will affect them in years to come. Many of those changes will begin to take effect in the coming months so 2016 could see some alterations to the way that contractors operate.
One of the major changes is the way that dividends are taxed, with changes to the rates applicable as per the Chancellor’s announcement last summer. At the time, many commentators were concerned that this would disproportionately affect limited company contractors in a negative way, but now that the knee-jerk reactions are over it appears that the situation might not be as bad as was previously believed. The new tax free dividend allowance rates will apply to dividend income over £5,000 and will be either 7.5, 32.5 or 38.1 per cent depending on the total income of the individual in question. Contracting through a limited company will still be the most tax efficient way to operate, but contractors will need to be aware of how they are affected by the changes.
IR35 is an issue which is never far from the headlines and many contractors have been desperate to learn the latest about how the rules will be applied in the future. The end of 2015 saw an announcement from the government pledging to publish a consultation document in the early part of this year to clarify the position regarding the intermediaries legislation. Promises that there will finally be some definitive information on what will constitute ‘supervision, direction and control’ when it comes to defining a person’s employment status have been welcomed by those who were finding the ongoing confusion surrounding the matter increasingly frustrating.
If you are considering taking the plunge and becoming a contractor in 2016 then our take home pay calculator can help you work out how much you could be earning. We also have plenty of other resources such as our guide to contractor tax and plenty of information about the advantages and disadvantages of a limited company.
For more information about how the changes will affect you and how best to organise your finances to ensure that you are as tax efficient as possible, our experienced accountants are always on hand to help you, so call today on 01442 275789 or email firstname.lastname@example.org.