Budget 2018: everything (else) you need to know
- 30 Oct 2018
Aside from the changes to IR35 (see more on that here), the Budget presented mixed but generally positive news for the self-employed. A more detailed overview by tax expert Anne Redston will be available for IPSE members shortly, but in the meantime, here is a snapshot of the good and bad news for the self-employed.
- No reduction in the VAT threshold. The Chancellor confirmed that the threshold for VAT will be frozen at £85,000 until 2022. Following a consultation process in which the government had mooted an intention to slash the threshold, the news of a freeze will be a relief for many businesses who will remain exempt from this financial cost and administrative burden.
- Trials to boost self-employed pensions. It was confirmed that the government will publish a paper this winter on boosting self-employed savings. It will outline a raft of trials to be tested in the New Year. IPSE will work closely with government. Given that IPSE research found just 31 per cent of self-employed people currently save into a pension, this is an area of the utmost importance.
- Bringing forward rise in Personal Allowance. Taxpayers will benefit as the Chancellor announced the Income Tax personal allowance will rise to £12,500, from £11,850, in April 2019. Earnings below this level will not be subject to Income Tax.
- Corporation Tax continues to fall. Despite pre-budget rumours to the contrary, the Chancellor did not backtrack on a reduction in Corporation Tax from 19 per cent to 17 per cent in April 2020. This will be a boost to all companies, including those self-employed people who work through their own limited company.
- More support for the New Enterprise Allowance (NEA). We were pleased to see the government announce an increase in funding for the NEA. The scheme has the potential to be a great springboard into the world of work and has already helped over one hundred thousand people onto the path of viable work. The NEA has been an especially good vehicle for people with disabilities.
- Rural broadband boost. The Chancellor has been pledged £275m to address poor broadband in rural areas. IPSE has long called for more action here – 85 per cent of freelancers in rural areas don’t have access to superfast broadband. The Chancellor stopped short of the investment needed to bring the UK in line with its plans to have ‘gigabit fast’ broadband through a new 5G network.
- Universal Credit problems remain. Significant increases in funding for Universal Credit were announced, especially helping in-work employed claimants by allowing them to earn £1,000 more a year before UC begins to be withdrawn. No similar support for the self-employed was on offer, however. Low-earning self-employed people continue to suffer as UC does not properly take account of the volatilie nature of self-employed income – IPSE continues to urge changes to the Minimum Income Floor.
- Tax-free training plans abandoned. Disappointingly, government has abandoned plans to change the tax system to allow self-employed people to deduct tax when they undertake training to develop new skills. IPSE had supported the proposal as we believed it would have incentivised more self-employed people to develop their skills. Instead, the government says the National Retraining Scheme will support the self-employed to ‘develop the skills they need to thrive’.
- Landlords hit again. Freelancers who rent out property will again see their finances affected. Landlords will no longer be able to claim £40,000 lettings relief against Capital Gains Tax when they sell a property. The period for exemption from CGT in the calculation for the tax will also be reduced from 18 months to nine months.
The Great Unknown
One issue not referenced at all in the Chancellor’s speech was the consultation on Employment Status, which concluded this summer following the Taylor Review. This was a significant and wide-ranging review, examining the legislative framework around employment status.
This will have a serious bearing on issues such as IR35 and the approach the courts take towards the platform economy. IPSE will provide a full analysis of the implications of this when government publishes its response.
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