The dust has settled on the 2012 Budget announcement, and our accountants have had a chance to take it all in, so here is a quick overview of the Budget announcements that might impact Crunch clients.
Yesterday’s Budget has been called a “pro-business” budget by many pundits, primarily due to the announcement of a 1% cut in the main rate of Corporation Tax, which will see the rate fall from 26% to 24% at the beginning of the next financial year.
For freelancers, contractors and micro-businesses there were no announcements that will change things imminently. The Small Profits Rate of Corporation Tax – the rate paid by the majority of Crunch clients – remains unchanged at 20%.
The headline announcement for Crunch clients was the increase in the tax-free allowance for the 2013/14 financial year. This coming April the tax-free allowance will rise from £7,475 to £8,105, and will rise again in April 2013 to £9,205. This means Crunch clients will be able to enjoy a little more of their income tax-free, and your tax liabilities should decrease slightly.
The Crunch system will be updated to reflect these changes in good time, so the transition will be completely seamless for our clients.
There was good news for young entrepreneurs with the announcement of Enterprise Loans, which will be similar to Student Loans and made available to those who wish to forego University in order to start their own business.
Although IR35 wasn’t mentioned in the Budget announcement, it did find its way into the Budget documents. Still frustratingly vague for those affected, the section entitled “Personal Service Companies and IR35” said:
The Government will introduce a package of measures to tackle avoidance through the use of personal service companies and to make the IR35 legislation easier to understand for those who are genuinely in business. This will include:
– Strengthening up specialist compliance teams to tackle avoidance of employment income;
– Simplifying the way IR35 is administered; and
– Subject to consultation, requiring office holders/controlling persons who are integral to the running of an organisation to have PAYE and NICs deducted at source by the organisation by which they are engaged. (Finance Bill 2013)
Child benefits will now decrease gradually for those earning over £50,000 per year, with benefits being withdrawn entirely by the time earnings reach £60,000. These caps apply if either parent earns over £50,000, so Crunch clients who split their company profits between themselves and their partner should still be in good shape.
VAT Registration threshold
From April 1st the VAT Registration threshold will be rising from £73,000 to £77,000, and the deregistration threshold rising from £71,000 to £75,000. If you have any questions about whether or not you should be VAT registered, your account manager should be your first port of call.
Some of the measures we had been expecting were announced but not implemented, such as reduced accounting responsibilities for micro-businesses with turnovers under £77,000, the merging of National Insurance Contributions and Income Tax and the closure of VAT loopholes. Obviously, we’ll be keeping a close eye on all of these initiatives and will cover them in more detail once we know specifics.
Our chief accountant will be going over the Budget documents with a fine-toothed comb in the coming days, and we’ll be sure to update all our clients if we uncover anything else relevant. The main take-home for now is that for freelancers, contractors and micro-businesses it’s business as usual.