Contractors will already know many of the proposed Budget 2012 measures due to be outlined by Chancellor George Osborne in his speech to the commons shortly. In addition to changes to tax bands and allowances, the most significant announcement expected today will be on how HMRC plans to ‘better administer’ IR35, following the work of the IR35 Forum created a year ago.
Despite the pre-announcements, there are still likely to be some surprises in store, although the Chancellor has little room for manoeuvre according to the BBC’s Stephanie Flanders. Here’s what we already know, subject to changes in Osborne’s speech:
- IR35: it is widely anticipated that the headline results of the work done by the IR35 Forum will be announced, taking the form of IR35 risk profiles designed to help contractors determine their IR35 status. The plans have been kept tightly under wraps, but a 12-month trial is thought to be part of the roll-out. The underlying IR35 legislation is unlikely to change, and it is possible that IR35 risk profiles might not be mentioned in the Chancellor’s speech at all; details could be buried in the documentation that follows his Commons announcements.
- Income tax allowances: The BBC has revealed the Chancellor’s intention to increase the personal allowance to over £9,000 next year. There is likely to be a matching fall in the higher rate threshold, taking more contractors into the higher rate tax band
- Additional rate tax: According to the BBC’s Robert Peston, the top rate of tax could fall to 45p from 50p from April 2013. Both Peston and the Telegraph’s Louise Armistead are critical of the delay in implementing the lower rate, echoing ContractorCalculator’s previous concerns that a delay could cost the Exchequer billions, with higher earners simply deferring dividend and bonus payments until the rate reduces
- Stamp duty: The Guardian’s Nicholas Watt confirms plans to raise stamp duty from 5% to 7% on properties worth more than £2m, which is forecast to raise an estimated £2.2bn. Watt’s calculations confirm that contractors buying a £2m property face a £140,000 stamp duty bill, and £5m properties will attract a £350,000 charge, up from £250,000.
Further coverage will be published on ContractorCalculator during and after the Chancellor’s speech, which is due to start at 12:30 on Wednesday 21 March 2012.