Much of the coverage of the 2013 Budget, delivered by Chancellor George Osborne this past Wednesday, has focused on the relative dearth of changes announced. With hefty national debt and not much room to manoeuvre, the Coalition had to forego any expensive give-aways or crowd pleasers. Osborne himself said during his speech that the 2013 Budget overall was ‘fiscally neutral’.
For freelancers, contractors and small businesses there were a few new measures of interest, as well as the promise of more to come.
Personal Allowance increase
Currently standing at £8,105 and rising to £9,440 at the start of the new tax year on April 6th, the Chancellor announced a further rise in the Personal Allowance for April 2014. The personal allowance, for the uninitiated, is the amount a UK employee can earn in a year before they start to pay income tax. Announced in the Budget was an anticipated rise to £10,000.
New ‘Employee Allowance’
In an effort to get small businesses hiring, the Government have launched a new scheme called the Employee Allowance. This new allowance will let businesses forego their first £2,000 of Employer National Insurance Contributions, meaning they can employ their first member of staff on an annual salary of up to £22,000 (or employ four staff on minimum wage) and pay no Employer NICs whatsoever.
The Department for Business, Innovation and Skills has been talking about their Business Bank scheme for months, but have now finally revealed the details with the launch of a Strategy Document.
The Business Bank will see a phased launch beginning in April, and should be fully operational (with its own branding, a CEO and Board of Directors) by the second half of 2014. It will have £3.9 billion in business finance to play with, comprised of £2.9 billion in existing schemes, and £1 billion of new capital. You can read more details about the Business Bank here.
VAT Registration threshold changes
From April 6th the VAT Registration threshold will jump by £2,000 to £79,000, and the deregistration threshold will rise a similar amount, to £77,000.
Osborne announced £30 million in funding for so-called “Growth Vouchers”, which will be doled out to small and medium-sized businesses in £5,000 chunks. Unfortunately for cash-strapped businesses, these vouchers do not equate to actual capital, and rather can be used to fund business support in the form of advice on topics such as marketing, HR, business planning and, of course, accountancy.
Loans from ‘close companies’
Currently any company can loan up to £5,000 to an employee tax-free (ostensibly for things like Rail season tickets) – this amount is due to double to £10,000 as part of the Finance Bill 2014. That bill most likely won’t see the light of day until April 2015, so this one’s still a way off.
Fast card processing for SMEs
The Chancellor announced he had “secured a commitment from the payment card industry” to speed up card transactions for SMEs by “up to three days”. Few details on this one, but anything that helps speed up cashflow is to be welcomed.
IR35 & Avoidance
The Chancellor unveiled a huge package of anti-avoidance measures, which the Treasury claims will claw back as much as £1 billion in avoided tax revenues. The introduction of a General Anti-Avoidance Rule is a big part of this package, and the Budget document also included details of proposed IR35 clarifications (albeit only a solitary paragraph). Opinion seems to be split as to how these new measures will impact freelancers and contractors, but we’re keeping an eye on it.
Experts on all things IR35, Qdos, told us that:
Unlike recent years the issue of IR35 was barely mentioned in the Budget, which is probably a good thing. Just one small sentence in the notes referred to the proposed treatment of ‘office holders’, but didn’t actually provide any clarification on the subject.
Meanwhile our resident IFAs Paradigm Capital summed up Osborne’s 2013 Budget thus:
George Osborne’s fourth budget seemed to contain few surprises and he painted a gloomy picture of the UK and global economic situation as the push for austerity continues. With a rise in personal allowance and a cut in corporation tax, there were also key messages and changes associated with pensions and retirement planning.