Contractors with pensions and savings are likely to benefit the most from what is a relatively contractor-neutral budget. The full Budget 2014 document includes confirmation that the false self-employment legislation will become law, but there are no changes to IR35.
Several areas of infrastructure and housing will receive additional cash that will benefit engineering and construction contractors. New tax rates on North Sea high-pressure high-temperature fields could stimulate activity in the region and generate new contracts for suitably qualified contractors.
The personal allowance will increase to £10,500 in the 2014-2015 tax year, and the higher rate of tax threshold will increase to £31,865 from 6 April 2014 (although the Chancellor George Osborne used the figure £41,865 this of course includes the basic personal allowance of £10,000).
The highlights for contractors include:
- Personal allowance to rise to £10,500 next year
- Fuel duty frozen, which will help contractors who commute
- Radical pension proposals will help contractors access their money locked in small pension pots from previous employments
- ISAs are overhauled, with the limit raised to £15,000 per year, and new pensioner bonds planned to provide above market rates on investments
- The Help-to-Buy scheme is being extended to 2020, which will benefit contractors yet to get onto the housing ladder.
- The increase to the annual investment allowance is unlikely to benefit contractors directly, but it may unleash investment from contractor clients and generate new contracts
- Similarly, the measures planned to reduce energy bills should benefit contractors indirectly, as contractor clients have cash freed up for growth and investment
- Fuel duty is being overhauled, which may benefit contractors working for overseas clients
- No other surprises on the company taxation, as IR35 remains untouched and the false self-employment legislation will be implemented as planned
- The self-employed can make additional voluntary National Insurance Contributions (NICs) to increase their state pension.
Other measures benefiting contractors
- Investment and relaxation of planning rules should result in a resurgence of housing market and infrastructure spending that should translate into contracts for construction and engineering contractors
- UK exporters are to receive further support, so contractor clients with overseas clients could be attractive contract targets in the coming months and years.
The pension and savings proposals were unexpected, and we will be publishing further analysis on these areas after consulting with relevant experts.