Last year’s Autumn Budget saw big changes in funding for the technology industry, NHS, the environment, and the property sector.

The Budget speech also touched on the continuing reduction in national debt but, on a smaller scale, how the government would work to support the self-employed.

What does this mean for contractors in 2018?

IR35 is the common name for the Intermediaries Legislation, designed to combat what the tax man deems as “tax avoidance”. For contractors, you need to determine whether or not you are classed (by HMRC) as employed or self-employed by applying your situation to their guidelines. If you do not meet HMRC’s definition of self-employed, the IR35 rule means you will pay near-standard employee NICs and income tax.

In the public sector, rather than the contractor determining IR35 legibility, the contracting organisation does. The result of this has been 89,000 more people registering as employees rather than contractors.

A similar roll-out to private sector contracts was expected in this year’s Budget but did not materialise.

Personal tax and wages

The personal allowance for individuals will increase from £11,500 (2017/18) to £11,850 in 2018/19. The higher rate threshold will also increase from £45,000 to £46,350 in 2018/19. These moves are part of a multi-year effort to increase the personal allowance of £12,500 and higher rate threshold of £50,000 by 2020.

The National Living Wage, which affects those aged 25 and over, will see a 4.4% increase from £7.50 to £7.83 per hour, effective from April 2018. For full time workers, this will result in an annual increase in pay of around £600.

No changes have been made to the plan to reduce the current tax-free dividend of £5,000 to £2,000 from the 2018/19 tax year.

Benefits and relief

April 2018 marks the end of Benefit In Kind (BIK) for those who charge their electric vehicles at their workplace. From this date, the BIK percentage for diesel company cars will increase by 1%, meaning the additional supplement increases from 3% to 4%.

The Enterprise Investment Scheme relief will see investment in qualifying technology companies doubled allowing a generous 30% income tax relief on investments on up to £2,000,000.

Your businesses and business taxes

The current VAT registration threshold of £85,000 will remain in place for the next two years, despite the widely-held belief that it may reduce following a report from the Office of Tax Simplification. There will be ongoing consultations taking place to identify how the VAT system can be made less complex.

As planned, Corporation Tax will remain at its current rate of 19% until April 1^st, 2020. From then on, it will be reduced to 17%. Corporation Tax losses can continue to be offset against 100% of profits up to £5million. Should profits exceed this threshold, losses can only be offset against 50% of profits.

The Research and Development Expenditure Credit will increase from 11% to 12% of qualifying expenditure. This change will take place in April 2018 affecting both large companies and SME’s who sub-contract for larger companies.

From January 2018, indexation allowance in respect of a company’s chargeable gains will be removed.

In a move which will likely provide relief to many businesses, future Business Rates increases will be linked to CPI instead of RPI from 2018.

Additionally, the £1,000 discount on business rates for pubs (implemented April 2017) will remain.

What other tax changes may affect you?

Stamp Duty for first time buyers when purchasing a property up to the value of £300,000 has been abolished as of 23^rd November 2017. First time buyers in more affluent areas where house prices are higher will not have to pay Stamp Duty on the first £300,000 of a property purchased for up to £500,000.

For first time buyers purchasing a property with a value exceeding £500,000, Stamp Duty will apply as normal. This move cuts Stamp Duty for 95% of first time buyers and gets rid of it completely for 80% of them.

There will be no increase in duty on alcohol, and cigarette/tobacco prices are subject to increase at inflation plus 2%, should an increase occur.

Diesel cars which do not meet latest standards will be subject to a one band rise in Vehicle Excise Duty, effective April 2018. Vans are not affected by this change.

Whilst a rise in fuel duty was planned for the Budget, this has been cancelled until further notice.

With regards to tackling VAT fraud online, all online marketplaces (e.g. Amazon, eBay etc.) will be jointly liable to ensure that the individual seller accounts for VAT correctly. For retailers who do not operate through an online marketplace, this will ensure a fairer system.

To help with your 2018 tax planning, speak to the Burton Beavan team today on 01606 333900, or email us on hello@burtonbeavan.co.uk