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2013 Budget for contractors

27.03.13

Last Wednesday's Budget failed to bring many surprises, partly due to the fact the London Evening Standard posted their front page, containing the major Budget announcements, before Chancellor George Osborne had started his speech. All in all, there weren't many points within the Budget for contractors to get excited about.

As mentioned in our first Budget article, the rise of the Personal Allowance threshold from £9,440 to £10,000 is set to benefit the majority of earners across the country. Personal allowance will rise to £10,000 in April 2014, a year earlier than planned.

No further rises in Class 4 or Class 2 National Insurance Contributions (NICs) were announced at this year's Budget. The previously announced increase in Class 2 will go ahead on 6th April, rising from £2.65 to £2.70 per week. Also on 6th April, the lower profit limit for Class 4 NI will rise from £7,605 to £7,755 and the upper profit limit will drop from £42,475 to £41,450. Which is good news, as a little less of your profits will attract the full Class 4 rate.

Mr Osborne failed to include new IR35 guidance, despite many predicting otherwise. New provisions for IR35 'office holders' should be announced by HMRC in due course, although this shouldn't affect many contractors as it will be aimed at those in 'senior' positions, i.e. directors and managers.

Paragraph 2.192 of the 2013 Budget document states:

"As announced at Autumn Statement 2012, the Government will make a small amendment to the existing IR35 provisions to equalise the tax and NICs treatment of office holders, and put beyond doubt that the legislation applies to office holders for tax purposes. (Finance Bill 2013)"

The Budget also revealed that the coalition government is looking to use Self-Assessment to simplify the payments of both Class 2 and Class 4 NICs.

Additionally, the Start-Up Loans scheme, aimed at helping young entrepreneurs, has been given a further £30m boost, and the age limit has been increased from 24 to 30 so more people can benefit.

All in all, it wasn't a disastrous Budget for contractors, although many experts expected the self-employed to get a more of a mention but the 2013 Finance Bill should reveal more. Several points raised in the Budget, such as cuts for small businesses, may aid sole trading contractors in the future.

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