Will contractors avoid the public sector in future?
With many people still trying to work out what impact the 2016 Budget will have on them personally, there are some moves which were aimed at contractors that have already changed the way people feel about their future employment prospects.
Contractors are already reporting that they will not be as keen to work in the public sector as they might have previously in the wake of the changes announced that will take effect in April 2017. With all personal service companies being subject to IR35 testing when working for publicly funded clients from that point, many contractors believe that they will effectively become PAYE employees once the changes take effect.
Some believe that the recent changes, and the failure to reconsider them in the light of public pressure, amount to a series of ‘attacks’ on the independent workforce. The announcement about PSCs has come hot on the heels of the changes to the way dividends are taxed, meaning that it has become harder to ensure profitability when it comes to operating as a one-man-band.
The Association of Independent Professionals and the Self Employed have run the figures and established that contractors who work through PSCs are still able to operate at a financial advantage until April 2017, with those who turn over more than £87,000 a year potentially paying £2,000 less in tax than they would as an employee.
However, this £2,000 has to cover all the costs of running the business, making up for the shortfall in employment benefits that are not available to contractors.
Many experts believe that the changes being applied to the public sector are likely to be rolled out to the private sector ultimately, and the success or otherwise of these current measures might set the tone for any such plans in the future.
The fact that the announcement only applies to the public sector is something to be celebrated, and groups that represent freelancers will be fighting to limit their scope for the foreseeable future.
Anyone considering a career as a contractor can use our take home pay calculator to estimate their potential income, and we also have plenty of information about the advantages and disadvantages of a limited company and plenty of free contractors’ guides to help you understand your options.
If you want to be sure that you are operating in the most tax efficient way, the our accountants can help, and our low-cost packages are designed to save you time and money when it comes to managing your finances. Call today for advice and information on 01442 275789 or email firstname.lastname@example.org.