Clearly the main topic of interest to contractors in Monday’s Budget was the deferment of the extension of the ‘off-payroll ‘ riles to the private sector. The concession that it will only apply to large and medium-sized businesses will, however, be of small comfort to freelancers if it is only those organisations with 50 or fewer employees that will be exempt from the rules. IR35aside, what were the other announcements of interest to freelancers?
INCOME TAX AND NIC
Personal Allowance and Tax Thresholds
One year earlier than planned, the personal allowance will rise to £12,500 and the higher rate threshold to £50,000, from April 2019. These will then remain at the same level in 2020/21 and the personal allowance will then increase by Consumer Price Index.
According to the government, the £650 increase in the personal allowance means that in 2019/20 a typical basic rate taxpayer will pay £130 less tax than the previous year and £1,205 less in 2010/11.
To target the Employment Allowance to support smaller businesses, from April 2020, only employers with an employers’ NIC bill of below £100,00 in their previous tax year will be able to claim the £3,000 reduction. The government estimates that 99% of micro-businesses and 93% of small business will still be eligible for Employment Allowance.
Annual Investment Allowance (AIA)
AIA is to be increased from £200,000 to £1 million for all qualifying investment in plant and machinery made on or after 1st January 2019 until 31st December 2020.
From April 2019, the special rate for qualifying plant and machinery assets will be reduced from 8% to 6%. Assets that attract this rate of capital allowances include items with a long life and cars with CO2 emissions greater than 130g/km.
Digital Services Tax (DST)
From April 2020, a new 2% tax will apply to revenues of certain digital businesses to ensure that the amount of tax paid in the UK is reflective of the value they derive from their UK users. The tax will apply to ‘UK’ revenues above £25 million generated from the provision of search engines, social media platforms and online marketplaces of businesses with in-scope annual global revenues of more than £500 million. Loss-makers will be exempt, and a reduced effective rate of tax will apply to businesses with very low profit margins.
CAPITAL GAINS TAX (CGT)
For disposals of qualifying assets made from 6th April 2019, the minimum period throughout which the qualifying conditions for relief must be met in increased from 12 months to 24 months.
In addition to the current requirements on share capital and voting rights, from 29thOctober 2018, shareholders must also be entitled to at least 5% of the distributable profits and net assets of a company to claim the relief.
Private residence relief
Provided that a house has at some time been an individual’s only or main residence, the last 18 months of ownership are always exempt in calculating CGT, whether they are living there or not. This final period of exemption is however to be reduced to 9 months.
From April 2020, lettings relief available on the disposal of residential accommodation that was once a main residence and also been let, will only apply in circumstances where the property owner and tenant is in shared occupancy.
The VAT threshold will remain at its current level of £85,000 for the next two years until April 2022.
A call for evidence on the design of the VAT threshold is being published and the government will look again at the possibility of introducing a smooth mechanism once the terms of Brexit are clear.
TAX ABUSE AND INSOLVENCY
Following Royal Assent of Finance Bill 2019-20, directors and other persons involved in tax avoidance, evasion or phoenixism will be jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency.