Rishi Sunak dubbed it the ‘Getting it Done’ budget, but in light of prevailing circumstances, it’s called the Coronavirus budget. The budget includes several packages that take and give to contractors making a living in the UK. These are some of the new introductions:
Higher starting thresholds for NI, benefitting PAYE, and PSC contractors
Thanks to this change, contractors who operate through an umbrella company will be able to take home an additional £115.08 at the end of the year. It also doesn’t affect access to state pensions so that this tax break doesn’t cause negative financial implications later in life.
Increment in Use of Home allowance, benefitting PSC contractors
The working from home rate deduction has been increased from £4 to £6. This increase comes at a time when many companies have most of their staff to work from home. This is good news for many contractors.
New legislation to tackle Disguised Remuneration scheme promoters
This proposed legislation adopts most of the recommendations from the Sir Amyas Morse Review with respect to the 2019 Loan Charge. The new measures include stronger measures to confront those who promote and market schemes. So far, no promoter of a loan scheme has been prosecuted, while their victims have been left in ruins. This new initiative may not recompense for what victims so far have lost, but it may ensure that others don’t have to fall into the same trap.
Beefed up Time to Pay support from HMRC, targeted at the self-employed
The Time to Pay (TTP) is to be scaled up. This way, if you’re self-employed or a business and if you can’t pay your tax bills on time, you can defer tax payments. To back up this initiative, over 2,000 staff at the HMRC would be on standby to assist those affected. There’s also a dedicated helpline for TTP – 0800 0159 559. Late payment penalties and interests will be waived for traders who experienced administrative difficulties in contacting the tax office or paying taxes due to Coronavirus.
Increased assistance for self-employed people that are parents, mortgage applicants, and taxpayers.
A new interactive tool will be launched by the HMRC to help solo business people navigate the tax system easily. It also includes better guidance for mortgage applicants who are self-employed. Self-employed persons who work in rural areas or places that suffer from poor internet connectivity will benefit from a £5bn commitment from the chancellor to introduce gigabit-capable broadband. Also, duties on spirits, wine, cider, beer, and fuel, have all been frozen.
A reduction in the lifetime limit for Entrepreneurs Relief from £10m to £1m
Because this limit is for life, it might limit the capacity of some contractors. For those who might end up affected, once their lifetime limit is exhausted, they will have to start paying CGT at the rate of 20%, as opposed to 10%, when the Relief subsists. Another issue with this review is that it is ill-timed with no room for affected parties to adequately adjust. Some contractors have built reserves up to £1m, expecting to consolidate on this and build more, only to find out their ER allowance has now been reduced to £1m.
Exclusion of IR35 contractors from a Coronavirus support package
The Coronavirus support package is a £12bn package from the chancellor targeted at individuals and businesses. It is made up of a Statutory Sick Pay made available to those who are advised by their employers to self-isolate, even though they have no symptoms. It also refunds any business with fewer than 250 staff the cost it incurs from providing Statutory Sick Pay (SSP) to employees who don’t work because of coronavirus, for up to 14 days. It also covers who are otherwise ineligible for SSP like the self-employed but are on the Contributory Employment and Support Allowance, by allowing them for eight days, instead of 14 days.
Inside IR35 contractors, however, do not qualify for this. Where a firm has more than 250 staff or contractors, it cannot lay claim to this benefit.