By Jonathan London on 19th March 2015

Death, Control & Simplification – The Budget 2015 in Review

The drum pounding began in earnest as the 2015 General Election approaches, but did we expect anything less from Chancellor George Osborne in his last Budget Speech of the current Parliament? Here we take a quick look at the main points impacting the UK’s self-employed workforce and those working through a personal service company.

Tax simplified

Following calls from rival political parties, as well as the main contractor industry bodies and communities, George Osborne delivered when it came to simplifying the tax position for contractors, freelancers and the self-employed.

His first move was to abolish Class 2 National Insurance contributions (NICs) which applied to those classed self-employed. However, whilst taking away this burden, the Chancellor announced reforms of Class 4 NICs, which could ultimately remove any potential benefit for self-employed freelancers.

Your personal tax free allowance will also increase again in the 2016-17 tax year, rising to £10,800, and onto £11,000 the year after.  The higher tax rate band will also rise to £43,300 by 2017-18. Your personal allowance will be £10,600 for the new tax year which begins on 6th April.

Death of the Tax Return?

Perhaps the most interesting announcement from the Chancellor came when he stated:

Twelve million people and small businesses are forced to complete a self-assessment tax return every year. It is complex, costly and time-consuming. So, today I am announcing this.

We will abolish the annual tax return altogether. Millions of individuals will have the information the Revenue needs automatically uploaded into new digital tax accounts.…

This is great news for millions of people across the UK, and will make the stress and scrabbling around in January to file a self-assessment a thing of the past.  However, before you pop the champagne, you’re still going to need to file a return for the current tax year after 6th April, as the Digital Tax Accounts will be rolled out over the next few years.

An interesting point of note on the Digital Tax Accounts is that accounting software providers will have the ability to link into the new HMRC system, providing the ability to update tax liabilities in real-time.

We’ll of course keep an eye on further announcements in relation to the new system when they are made later in the year.

Tax evasion clampdown

The focus remains on clamping down on serial tax evaders, with £5 billion of Government savings looking to be made in this area.

Whilst the aggressive tax avoidance schemes employed by larger companies (such as the Google Tax…) will be the main focus for HMRC, this didn’t stop the Chancellor making specific reference to recruitment agencies and umbrella companies.

From April 2016, the Government and HMRC may be clamping down on travel and subsistence expenses claimed by employment intermediaries, whilst also looking to protect those ‘genuinely self-employed’.

What this means is, that from April next year, there will be a restriction on the ability to claim travel and subsistence expenses for those working through an umbrella, agency workers, and potentially those working through PSCs.  It is likely that this will impact those PSC contractors whose end client has significant levels of supervision, direction and control of their actions, i.e. if you’re seen to be inside IR35.

Further announcement on Government plans in this area are expected following a period of consultation, so keep an eye on our blog or social channels for updates.

Budget 2015 Roundup

We’ve put together our usual summary document of the Budget Speech, and information on the new tax rates in the PDFs below.

2015 Budget Summary 2015 Budget Tax Card

Jonathan London Written by Jonathan London

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