Emergency Budget Impact On Contractors
As expected IR35 (otherwise known as Intermediaries Legislation) will be reviewed as part of a wider review of small business taxation. Prior the formation of the Coalition Government the Conservatives announced plans to review the legislation in a letter to the Professional Contractors Group (PCG). Details are expected to be released in the near future.
The rate of Value Added Tax (VAT) will be increased from 17.5% to 20% on the 4th January 2011. For further details of the implications of the increase on the retail sector please see 20% VAT Rate Announced
No mention of Income Shifting or Umbrella Company Expenses
No mention was made of Income Shifting or Umbrella Company Expenses. With the Implementation of the Agency Workers Directive (AWD) due for late 2011 any change may not have mattered that much anyway. Umbrella Companies may face the chop with the introduction of the new AWD legislation.
Personal Tax Allowance Increase
The Basic Personal Tax Allowance will increase to £7,475 from April 2011. The allowance will therefore increase by £1,000.
Higher Rate Tax
Higher Rate Tax Bands will be frozen until 2013 / 2014. This will only impact truly high level earners.
Small Business Corporation Tax
The Small Business Corporation Tax Rate will be reduced down to 20% in 2011
Capital Gains Tax
Capital Gains Tax will increase to 28% for higher rate taxpayers from midnight tonight (22nd June 2011). The tax rate jumps from 18%
CIPD Reaction to Emergency Budget
The Chief Advisor at the Chartered Institute of Personnel & Development, John Philpott, said Osborne’s speech “must surely rank as the most astonishing UK budget statement in modern times,” and that the deficit reduction plan represented an “unprecedented fiscal squeeze”. “Yet both he and the independent Office for Budget Responsibility (OBR) reckon there is a greater than evens chance that the government will meet what the Chancellor calls its ‘fiscal mandate’ with barely any serious short-term impact on economic growth and employment.”
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