The surprise announcement last week that Chancellor Philip Hammond will be holding the Budget so early in the year should really be no surprise at all.
With Brexit dominating the political agenda, and the very real possibility of leaving the EU with no deal, holding the Budget in advance of a possible EU Brexit summit in November make sense.
So with the Budget set for October 29 – unusually, the Chancellor has chosen a Monday – what can we expect or hope him to announce?
We think to a certain extent the Budget will be very light. The Chancellor won’t be able to do much more than tinker with taxes, as the outcome of Brexit is so uncertain.
He has already cancelled his plans to abolish Class 2 National Insurance contributions (NICs) for self-employed individuals. The move was part of the National Insurance Contributions Bill, which has itself been delayed from April this year to April 2019.
Self-employed individuals have to pay a flat weekly rate of NICs if they make a profit of more than £6,205 a year. The government had said it would scrap this payment, benefitting millions of self-employed workers.
Corporation Tax could be one to keep an eye on. If we leave the EU with no deal, it’s possible the government will slash this tax to attract businesses to the UK, or at least to discourage them from leaving. Currently at 19%, the government is already planning to achieve a 17% Corporation Tax rate by 2020.
The Chancellor is almost certain to press ahead with the Making Tax Digital (MTD) programme, which is the government’s plan to digitalise the taxation system for businesses and individuals.
The changes will be phased in from April 2019, and initially affect VAT. From April, VAT registered businesses with turnover above the VAT threshold, unless digitally excluded, will have to file their VAT returns using MTD compatible software.
We also believe there may be some announcement around IR35, which refers to the government’s anti-avoidance tax legislation designed to tax ‘disguised employment’ at a rate similar to employment.
These tax rules have already been introduced for contractors working in the public sector, and have netted £410m in income tax and national insurance contributions since they came into force in April last year.
It’s certain the Chancellor has the private sector in his sights and may well make an announcement at the Budget about changes to be introduced from April.
If you’re a contractor likely to be affected by IR35, or a business concerned about Making Tax Digital, why not talk to the accountancy team here at Optimum Professional Services.