The 2013 budget contained very few surprises with Chancellor George Osbourne mainly re-affirming what had previously been announced in December’s Autumn Statement.
There were very few measures introduced that will have a significant impact on contractors, however we have summarised the main items that may be of interest to you:
Corporation Tax – The 2013 budget announced that the Corporation Tax rate for companies with profits over £300,000 would be reduced further to 20% from April 2015 to bring it in line with the corporation tax rate for small businesses.
Employment Allowance – From April 2014 all businesses can offset the first £2,000 of employer class 1 National Insurance Contributions (NIC). This will be claimed through Real Time Information (RTI) when wages are processed.
This is great news for contractors as it will result in a 13.8% saving on any salary above the NIC threshold.
IR35 – We still await final revised legislation relating to office holders paying PAYE and NIC as employed earners and we will keep you informed of any further developments regarding this.
IR35 continues to be a prevalent issue for HMRC and if you are in any doubt as to your compliance our team are available to discuss this with you on 01900 898 440 or alternatively email email@example.com.
Personal Allowance – This will increase from £8,105 in 2012/13 to £9,440 in 2013/14 allowing people under 65 to earn an additional £1,335 of tax free income.
It was also announced that the personal allowance for 2014/15 would increase to £10,000 in 2014/15.
Additional rate of tax – It was previously announced in the Autumn Statement that the additional rate of tax for those whose personal income is in addition of £150,000 will be reduced from 50% to 45% as of 6 April 2013.
This means that any dividends taken over and above this threshold will now be taxed at 37.5% rather 42.5%.
The threshold at which you are now required to register for VAT now stands at £79,000 (2012/13 – £77,000). The deregistration limit is now £77,000 (2012/13 – £75,000).
Pensions – The annual allowance an individual can pay into their pension will decrease from £50,000 to £40,000 in 2014/15. However, you will still be able to use your unused allowance from the previous year.
Capital Gains – Every individual’s Capital Gains Tax annual exemption will increase from £10,600 to £11,000 in 2014/15 to £11,100 in 2015/16.
General Anti-Abuse Rule (GAAR) – As previously announced the Finance Bill will introduce a new rule, the GAAR, to tackle ‘abusive tax avoidance schemes’.
This is aimed at the more aggressive and artificial tax avoidance schemes. This should have very little affect on contractors unless they are involved in particularly contrived working arrangements.
Child Benefit – From 7 January 2013 Child benefit will be withdrawn through self-assessment for households where one member has an income of over £50,000.
Where the income is between £50,000 and £60,000 the charge will be tapered up to the £60,000 threshold where the benefit will be withdrawn entirely.
We would advise that anybody who anticipates their earnings to be in excess of £60,000 in 2013/14 to be aware that any child benefit received during the year will have to be paid back in full through self-assessment.
Director’s Loan Account – Currently as a director of a limited company, a taxable benefit will arise on you personally if the company were to loan you more than £5,000. From April 2014 this threshold will double to £10,000.
You should be aware that any loans taken from the company that remain outstanding 9 months after the company year end will also result in a tax charge.
Simplyco are expert contractor accountants and give the best advice around to the contractors they work with. To enquire about our services, please give us a call on 01900 898 440 or email firstname.lastname@example.org.
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