Contractors look set for a relatively trouble-free 2012 Budget, if the draft Finance Bill 2012 is an accurate reflection of what can be expected. In fact, some contractors may be better off, as the personal allowance increases and the ESC C16 rules for taking capital out of closing contracting businesses are in line to be changed.
However, the basic rate is actually decreasing slightly from £35,000 in the current financial year to £34,370 in 2012-13. The net impact, as the personal allowance is not increasing as fast as the basic rate has decreased, may be to tip some contractors into the higher rate tax band for the first time.
Other measures, such as further cuts to the main rate of corporation tax and reforming the foreign controlled companies regime, will make the UK a more attractive place to do business for client organisations. These measures may indirectly benefit contractors by potentially increasing the pool of clients.
Contractors seeking to diversity their contracting business into other areas, or who wish to invest surplus cash in another business, also look set to benefit. Planned incentives for entrepreneurs include 50% tax relief on investments of up to £100,000 into small “genuine new ventures” with fewer than 25 employees.
According to Exchequer Secretary to the Treasury David Gauke, the new policy of publishing the Finance Bill upfront and consulting with stakeholders is working well: “By confirming intended tax changes ahead of publication, we are giving greater certainty and stability to taxpayers and businesses than they have had in the past.”
But, in an interview with AccountingWeb, Gauke added that those clauses of the Finance Act that have been release represent the “majority” of what is to come. This suggests that there could be more measures planned that might affect contractors.
Published: Wednesday, December 07, 2011
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