Earlier this afternoon, Rishi Sunak's first budget announcement as Chancellor of the Exchequer took place. the new chancellor, Rishi Sunak, delivered his first budget to the House of Commons. The hotly anticipated budget, which was delayed in 2019, announced some big upcoming changes. If you didn't watch you may be wondering what the key announcements were that are set to affect the contracting industry.
As always, we watched the announcement and have summarised the key points for you below. However, if you'd like to read the budget in its entirity you can do so on the government's website here.
Off-Payroll (IR35) reforms*
The controversial private sector off-payroll reforms will go ahead from 6 April 2020*. Although the chancellor did not reference the reforms in his speech directly, the ‘red book’ issued after the speech confirmed the following:
‘The government believes it is right to address the fundamental unfairness of the non-compliance with the existing rules, and the reform will therefore be legislated in Finance Bill 2020 and implemented on 6 April 2020, as previously announced.’
The personal allowance remains frozen at £12,500. This is the allowance before 20% tax is applied to your personal income. Also frozen is the £50,000 threshold at which individuals start to pay the higher 40% rate of income tax. The rate of corporation tax is also remaining the same at 19%.
The chancellor confirmed plans to increase the threshold before employee’s national insurance contributions are due to £9,500 from 6th April 2020, with plans to ultimately increase this to £12,500.
Increase to National Living Wage (NLW)
As already confirmed, from 6th April 2020, the NLW will increase to £8.72 from £8.21.
The previous chancellor proposed limiting tax relief on pensions to 20%, however prior to the budget Mr Sunak ruled out these changes. He did however announce reforms to the complicated way taper relief is applied for higher earners.
You can find out more about the announcements made in our 2020 Budget Report.
With you all the way
If you have a question about how anything in the budget could impact you, get in touch with your account manager or give us a call and we'll be happy to help.
* Update: at the time this article was written, the off-payroll (IR35) reforms were due to be implemented on the 6th April 2020. On the 17th March 2020, the UK government announced that it would be deferring the reforms to the 6th April 2021 to help businesses and individuals during the COVID-19 crisis.