PBR Not As Gloomy For Contractors As Predicted
Chancellor Alistair Darling yesterday unveiled his second pre-Budget report of this economic downturn. Across the contracting industry this week, there were gloomy predictions of what the report would announce but as Contract Eye discusses, the Pre Budget Report really wasn’t the disaster many thought it would be.
Although there was no promise to repeal IR35 as some had hoped for, equally there was no threat to reintroduce ‘income shifting’, as some had feared. Shout 99 also added that there was no recognition of the role the contracting sector can play in the economic recovery, but equally, there were no further measures targeted at what the Government likes to call ‘false self-employment’.
The PCG called the PBR a political event which did nothing to help the UK’s nano-businesses and self-employed community. They said that it was apparent that the Chancellor had put off the difficult decisions until after the next General Election.
John Brazier, MD of the PCG said:
“There was a lot of talk by the Chancellor today about fairness, however this PBR has failed the fairness test for the UK’s 1.4m knowledge based freelancers. IR35 was not abolished, National Insurance Contributions are to go up in 2011, by double what he previously said and the only crumb of comfort is that the small business corporation tax rate rise is to be deferred. The borrowing figures are huge and the public expenditure cuts in years to come are bound to be savage, affecting all sectors of the economy and ordinary people.”
It has been good news for limited company contractors, with Alistair Darling announcing that the proposed 1p rise in corporation tax is to be deferred. The announcement on increasing National Insurance Contributions is going to affect everyone. Some contractors and freelancers may decide they want to incorporate rather than be part of an umbrella company, as this may make savings for them in the future. Only the very highest earning contractors are likely to be significantly affected, with the top rate of tax for people earning more than £150,000 rising to 50% as of April next year.
Overall, the industry seems to agree that this has been a very middle-of-the-road pre-Budget report where contractors are concerned, with only the very highest earning contractors likely to be drastically affected.
Filed under: Contractor News
