24th March 2010

Contractors and the 2010 Budget

Contractors can expect to be worse off following a range of measures introduced by the Chancellor in this year’s Budget, with frozen allowances increasing contractor income tax bills in real terms. There was also confirmation of the 50% tax bands, as well as cuts to allowances and pension relief for higher earning contractors.

BBC’s Political Editor Nick Robinson summed up the 2010 Budget as: “Short on economic announcements, but long on party political statements.”

An analysis of the detailed Budget document reveals that there are no changes to core contractor issues, such as IR35, Section 660, umbrella expenses and NICs on dividends from personal service companies (PSCs). In addition, VAT remains unchanged, despite forecasts of a hike to 20%.

However, contractors holding assets overseas are in the firing line, as anti-avoidance measures are beefed-up and offshore tax-shelters are targeted.

An additional £500m in increased tax take per year is anticipated through HMRC’s activities and the doubling of fines. Employee Benefit Trusts get a special mention, but no concrete plans are announced.

Against a backdrop of lower borrowing forecasts, but also lower growth forecasts, the Chancellor has presented what he calls a budget that will, “Allow the talent of the British people to flourish… secure recovery, tackle borrowing and invest in our industrial future.”

But there are no measures designed to improve the fortunes of the contractors, freelancers, flexible workforce or to recognise their importance in economic recovery and growth.

Source: Contractor Calculator