Britain held its breath for the Autumn Budget released this week, expecting major changes as we move closer to Brexit. And yet, for the self-employed, the Budget 2017 was relatively light-touch in nature, particularly for some individuals such as contractors.
To get a better understanding of what was announced – and excluded – in the Autumn Budget 2017, let us outline some of the key takeaways for the self-employed:
Increase in the personal allowance
It’s become standard practice for the government to increase the tax-free personal allowance in line with inflation, and this was continued in the Budget 2017. In April 2018 this will rise from £11,500 to £11,850, saving the average taxpayer around £60 per year.
Higher rate taxpayers will see their threshold increase too, as this rises to £46,350 in April 2018.
Freeze in the VAT threshold
There were fears in the build-up to the Budget that the VAT threshold would be targeted by the government in a bid to claw-back tax over the coming years.
It’s been noted that £85,000 is high compared to elsewhere in Europe (£15,600 in Germany), yet the Chancellor also recognised the benefit this has to the self-employed and small businesses.
For many, the decision to freeze the VAT threshold for the next two years was seen as welcome news. However, as inflation increases this does in fact represent a real-time reduction. Ultimately, it could draw some people over the threshold ahead of the implementation of Making Tax Digital for VAT returns in April 2019….
No roll out of IR35 to the private sector
Another great expectation surrounded IR35; following changes to IR35 for those in the public sector, many anticipated a rollout to the private sector in the Autumn Budget 2017.
In this case, no news was certainly seen as good news by contractors whose tax status revolves on whether they sit inside or outside of IR35 when declaring their earnings. A consultation is due to be released in 2018, when more details are likely to follow…
Freeze on fuel duty
Many self-employed people rely on Britain’s roads to go about their work. To this end, the freeze on fuel duty will go a long way in helping independent professionals and small business owners keep costs under control.
The government also announced plans to extend the first year allowances for zero emission goods vehicles and gas refuelling equipment, along with a wave of investment into clean air initiatives. Anyone upgrading to electric cars over the next few years will stand to benefit through tax savings.
Another win came with business rates announcements for sole traders with premises to think of. These will be reassessed every 3 years, instead of every 5 years, from now on. Furthermore, the government plans to bring forward the planned switch from RPI to CPI to April 2018, with the aim of easing the pressure of business rates on small businesses.
Increase in the National Living Wage
However, the move to reduce the burden of business rates may have been offset, in part, with the increase in the National Living Wage. This will be going up by 4.3% in 2018 from £7.50 to £7.83, far exceeding overall pay growth.
While this is good news for low income households, it presents a huge jump for small businesses that rely on low skilled workers to survive…
So, there we have the key takeaways from the Autumn Budget 2017. Philip Hammond brought no shock announcements for the self-employed, but he did show some efforts to support the millions of independent professionals and small business owners that currently prop up the UK economy.