Budget 2018: Key points
With Brexit fast approaching, a budget this week and Chancellor Philip Hammond claiming the “era of austerity” was ending, it’s easy for most people to be a little confused by all thing’s politics.
Watching Philip Hammond deliver his third budget, it was easy to think that an election must be in the offing. Chancellors normally show their poker face when parliaments are young and squirrel away any available cash so that they can give money away as polling day approaches.
The self-employed / Contractors
Hundreds of thousands of private-sector contractors face higher tax and National Insurance (NI) bills from April 2020. The chancellor announced that tighter tax rules for those working in the public sector will be extended to those working for private firms.
The rules, known as IR35, are designed to hit those deemed by HM Revenue and Customs (HMRC) to be employees. Among those affected will be IT contractors, engineers and consultants The crackdown is the biggest revenue-raising measure in this year’s Budget.
Critics accused the chancellor of hurting thousands of people who are self-employed, and burdening businesses too. But the Treasury insisted that the reforms would not affect anyone who was genuinely self-employed.
How will the new rules work?
For IR35 to apply, you have to work through your own company for another business.
If the way you work is similar to an employee of that business, you should pay income tax, and National Insurance (NI) at the 12% rate.
Up to now many contractors in personal service companies have been paying less tax and NI.But from April 2020, larger businesses – like banks – will take on responsibility for deciding which contractors will need to pay more tax and NI.
The rule change will not apply to the smallest 1.5 million businesses.
If someone is deemed to be an employee, the firm using the contractor will also have to pay NI for the first time.
Great news is that the contribution of small companies to the apprenticeship levy is to be reduced from 10% to 5% – for us, this is demonstration that the government are taking vocational learning seriously and great news for those adopting the apprenticeship revolution!
Before we head into the nitty gritty, let’s look at the indicators. Beer, cider, petrol and spirits duties are all frozen, although taxes on cigarettes and wine went up this week. That’s great news on fuel for our members, especially as we’re already seeing a price increase at the pumps based on crude oil.
The Income Tax personal allowance and 40p rate are rising to a Tory manifesto pledge a year earlier than planned. Stamp duty will be scrapped for more first-time buyers and the minimum wage is going up to £8.21 for over-25s.
- Income Tax personal allowance (the amount all workers get tax-free) to rise from £11,850 to £12,500 in April 2019;
- 40p Income Tax threshold to rise from £46,350 to £50,000 in April 2019, helping the higher earners by 13%;
- National Living Wage (minimum wage for over-25s) to rise from £7.83 to £8.21 in April 2019, 21-24 to rise from £7.38 to £7.70, 18-20 to rise from £5.90 to £6.15, 16-17 to rise from £4.20 to £4.35 and Apprentice wages to rise from £3.70 to £3.90;
- Huge Universal Credit climbdown as “work allowance” – the amount you can earn before benefits taper away – rises by £1,000 a year, giving 2.4million families an extra £630 a year. It will cost £1.7bn a year once rolled out;
- Another £1bn over five years to help people transition when they are moved on to Universal Credit;
- Benefits remain frozen for four years to 2019/20, cutting almost £4billion a year from the benefits bill.
Read the full budget statement here.