As far as the recruitment industry was concerned, the 2016 Autumn Statement was extremely dramatic. The announcement of the public-sector reform of IR35 changed the world for many contractors, and stakeholders at every level of the supply chain have been vocal in their criticism of the reforms themselves, and their implementation. A year later, Philip Hammond’s 2017 Autumn Budget was awaited, if not with actual dread then at least with trepidation.
Would the unpopular reform be extended to include the private sector? Would contractors once again be targeted by a government who failed to understand or value their contribution? It may still be, as some commentators have claimed, a question of “when” rather than “if” but the answer, this time round at least, is “not yet”.
The Chancellor has announced that the Government will consult during 2018 on how best to improve compliance in the private sector – though the Budget Report does state that public-sector compliance is improving, which may indicate that an extension of the reforms is still on the cards. Consultation does, however, give contractors, and the recruitment industry in general, an opportunity to make their case. We can expect to see focused, organised campaigns in the coming months, aimed at heading off what many believe would be a disaster for our industry.
While potential IR35 reform has dominated, contractors were watching for other details too. The planned reduction of dividend allowance from £5000 to £2000 is to go ahead, though given the negative and ill-informed news stories we’ve seen about the use of PSCs, there is widespread relief that this reduction has not been made even more severe.
It’s certainly not all bad news for contractors. Personal allowance rises to £11,850 in 2018/19 and is on course for a planned rise to £12,500 by 2020. The higher rate threshold will increase from £45,000 to £46,350, planned at £50,000 by 2020.
Corporation tax holds steady at 19%, and is still set to fall to 17%, again by 2020. Both will contribute to a rise in net income for contractors and the self-employed.
Class 2 National Insurance Contributions survive, for now at least, and the increase to Class 4 NICs has not been reinstated, as many commentators feared it would.
The VAT threshold has been frozen at £85,000, which is a relief for many due to rumours of a potential reduction to bring it in line with other European countries. Since the 2019 roll-out of Making Tax Digital will only affect companies whose turnover exceeds the VAT threshold, the freeze means fewer businesses will be affected.
2017’s Autumn budget lacks the drama some contractors and commentators were expecting, and it’s largely “business as usual” for another year. There could still be turmoil on the horizon, though. We hope that Government remembers the “vibrancy and resilience” of the UK’s small businesses, and the commitment Mr. Hammond made to them in his speech.
If you have questions about how the budget affects you, or if we can help in any way, please get in touch.