Gloomy Budget Offers Little to Contractors and Business
The Bad News in the Budget
- Warning to Umbrellas
- Growth forecast at 1.75% for this year
- Small companies tax rate rise of 2 pence
- National insurance contribution rise
- Petrol tax rise Postponed Until September
- Income Shifting Postponed for a Year
- Price of Booze to Rise
In a devastatingly dull address, Chancellor Alistair Darling offered little to contractors or to business in the 2008 Budget. The one piece of good news is the postponement of the infamous income shifting proposals which, however, the Government has not agreed to alter, although consultations are to continue.
Says Michael Izza, chief executive of the Institute of Chartered Accountants in England and Wales: ''We had hoped the 2008 budget would go further in helping businesses and taxpayers across the country at a time of economic downturn.''
Concerns About Umbrellas
In one measure specific to contractors and recruiters, the Government warned that further measures might be taken regarding umbrella companies that abuse their role. ''It's still a case of all the compliant umbrellas being made to suffer for the few that abuse these areas,'' said Mark Morris, commercial director for the Warrington-based umbrella Parasol.
Good Times Won't Roll
The good times may not roll in the coming year, thanks to the Chancellor, and that's only partly because the price of booze will go up 6% thanks to new tax.
The economic growth forecast for the nation as a whole will fall to 1.75% for the coming year, with a possible rebound to 2.5% in 2009 according to the Budget forecast.
Small Business Tax Raised
Taxes will no doubt go up across the board, but taxes for small companies like those of us contractors will go up in particular. The planned tax rise for small companies is from 20% to 21%, with a further increase to 22% in 2009.
National Insurance Contribution Rise
The contribution level will rise for those in higher income brackets by £100 per annum in National Insurance contributions. This increase is supposedly linked to improved NHS services, but we will not hold our breath.
Petrol Tax Rise-Postponed?
And, as if petrol prices of £1.06 per litre weren't high enough, Darling had announced plans to raise tax on petrol and probably drive the price over the £1.10 pound barrier. This has now been postponed until October so we can look forward to it.
Income Shifting
The one bright spot in all this is the Government's postponement of the infamous income shifting proposal which would have penalised small companies that divided dividend income among spouses or partners. No changes have been offered for this proposal, but further consultation is to take place.
''Overall, not a very exciting budget in any sense,'' says Bill Dodwell, a partner with the London-based consulting firm Deloitte.
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