Tony Blair has won an historic third term in government for Labour - but with a drastically reduced majority.
We highlight the financial issues affecting contractors.
IR35 and Section 660A
The Conservatives has previously suggested that if they came to power they would consider abolishing IR35 and reforming Section 660.
The Labour party have made no pledges to abolish these taxes on small business.
Tax rises & spending
Since 1997 labour have increased taxes 66 times. Much of this has been the increases in National Insurances contributions, the introduction of IR35, and the £5 billion a year raid on pension funds. Council tax has also risen 70%.
The recent landmark case on Section 660 for Arctic Systems will place a considerable further tax burden on small business.
Many commentators, including the international organisations the International Monetary Fund and the OECD, believe that the government is being over-optimistic about the amount of tax revenue that it is likely to receive in the next few years.
The Institute for Fiscal Studies (IFS) estimates the government will have to raise £11bn in taxes if it wants to restore the public finances to the state aimed for in the 2004 budget - that's equivalent to 3p on the basic rate of income tax or national insurance.
Contractors earning £25 per hour, who are caught by IR35 would have a net income reduction of around £750 per year if the basic rate of tax rose by 3%.
Regulation for small business
In the conservative parties policy document, Action for Business, Richard Branson is quoted as saying "Under the current regime, we would simply not have been able to achieve the same results. I worry about .. how difficult it must be to now start off in business." (17 April 2005).
The Conservatives pledged to significantly cut regulation. The largest regulators now spend three times the amount since Labour came to office.
What the future holds for the next parliament in terms of further regulation on small business remains to be seen.
Pension Reform
One of the biggest, and very expensive issues for the government is resolving the pensions crisis.
The interim report of the Pension Commission headed by Adair Turner, showed there was a huge pensions shortfall, and highlighted the need for more spending on state pensions and more savings by individuals.
The Commission plans to publish its Second Report, which will include policy recommendations, in Autumn 2005.
For contractors caught by IR35, pensions represent a highly effective way of diverting IR35 taxes into savings, with tax relief of up to 48%. Read more...