Summarising the Autumn Statement
Unless you've spent the last few days hiding in a cave (and if you have, we're not judging you) you'll have heard something about this year's Autumn Statement by now. After drip feeding out key policies and figures for the last week, today was the day that George Osborne delivered his statement in full. Traditionally a modest update on the state of the economy, this year's statement felt like a second Budget in all but name. It's fair to say that Osborne delivered it with two eyes firmly on the looming General Election in May, its weighty spectre creeping ever closer. BBC Political Editor Nick Robinson termed Osborne's headline announcements as real electioneering and he wasn't wrong.
This statement was Osborne's chance to cut Labour off at the pass, and his attempt to gazump one of their key election cornerstones, the so-called Mansion Tax', led to the announcement that stamp duty will be undergoing a complete overhaul from midnight tonight. Essentially, the changes will allow those buying cheaper properties to pay less and those purchasing more expensive homes to pay more (12% for the most expensive houses), equalling a tax cut of £800m, which will benefit 98% of homebuyers. As always, the statement felt more like a game of high stakes brinkmanship than anything else, but the vast majority of the outcomes were positive. Alongside that headline news, below you'll find a brief summary of the key figures and policies Osborne announced today (courtesy of the New Statesman), as well as an analysis of how exactly the changes might impact contractors and freelancers:
- The economy is predicted to grow 3 per cent this year, up from the 2.7 per cent predicted in the budget.
- Osborne will be borrowing £12.5bn more than forecast in the budget nine months ago.
- The deficit is forecast to rise by more than expected over the next two years: £91.3bn this year and £75.9bn the following year.
- The Office for Budget Responsibility says the deficit will pick up and fall faster than expected in following years, hitting a surplus of £23bn in 2020.
- A roads revolution: £15bn to be spent on new road funding in England. This includes a 1.8-mile tunnel to relieve congestion by Stonehenge.
- National Insurance abolished for employers that take on apprentices aged under 25.
- Income tax threshold to increase to £10,600.
- A new Sovereign Wealth Fund for the north of England, so that the shale gas resources of the north are used to invest in its future, and a commitment to "northern powerhouse" plans.
- Cutting £15bn from the Whitehall budget, and the government will spend £10bn less this year.
- Banks will pay £4bn more in tax over the next five years.
- Freezing universal credit, working-age benefit for two years, and ending unemployment benefits for migrants who have no prospect of work.
- Libor fines will continue to support military and emergency service charities, including buying new helicopters for the Great Western and Kent, Sussex and Surrey Air Ambulance.
- Extend cathedral renovation fund.
- Refund VAT for search ambulance charities and for hospice charities.
- Extending theatre tax break to orchestras.
- Air Passenger Duty on flights for under-12s scrapped from next year, and from 2016, it will be scrapped for all under-16s.
- Funding the NHS: a pledge to spend an extra £2bn a year on the NHS.
- Pensions: completing the reforms already announced, bringing total savings of £1.3bn a year.
- Repayment of the national debt incurred by fighting the First World War.
- 25 per cent tax on profits generated by multinationals from economic activity here in the UK which they then artificially shift out of the country (the so-called Google Tax).
- No increase in petrol duty.
- A new garden city in Bicester, Oxfordshire: up to 13,000 new homes to be built there.
- Flood defences: £2.3bn investment.
- Helping SMEs: a near £1bn boost for small businesses.
- Reform business rates: a review into the structure of this controversial tax on small firms. Double small business rate relief for another year.
- An overhaul of stamp duty, coming into place at midnight tonight: allowing those buying cheaper properties to pay less and those purchasing more expensive homes to pay more, equalling a tax cut of £800m, which will benefit 98 per cent of homebuyers.
- A postgraduate loans scheme: government-provided loans offering funding of up to £10,000.
So, what does it mean for freelancers and contractors? In general, Osborne's business focus is good news for small businesses. The planned restructuring of business rates will be welcomed warmly, and the continuation of a freeze on fuel duty has obvious benefits for microbusinesses across the country. However, this government's continued myopia with regard to improving the UK's digital infrastructure (the pressing need to improve the issue of poor broadband in rural areas for example) is still a cause for concern.
The crackdown on tax avoidance should also be applauded, but we second Andy Chamberlain of IPSE's comment that "any changes to umbrella companies [should] provide real benefits to those using these structures and do not inadvertently affect the genuinely self-employed." The good news on this front is that the government's review of umbrella companies should weed out the unscrupulous practitioners (those, for example, who offset expenses against income so their taxable income is below the national minimum wage). As Rob Crossland, founder of Parasol, noted: "This could be the landmark moment that policymakers finally take the time to properly understand our industry, differentiating between unethical cowboys at one end of the spectrum and compliant, professional providers...at the other. Any umbrella company that fails to offer genuine employment rights or pay the minimum wage deserves to be placed under the spotlight. Such practices are unacceptable they do a disservice to workers, our sector and the UK economy as a whole." If you're just starting out on your own and are thinking of going through an umbrella company, then make sure to do your research before hand. Get feedback and make sure they're trustworthy and reputable. If you find a company with your best interests at heart rather than their own then you'll be in a good place.
In addition to the above, the small companies' rate of Corporation Tax remains unchanged at 20% (for companies with profits under £300,000), still making it an attractive proposition for sole traders who are considering incorporating their business. There were a few changes made to National Insurance too. For limited company contractors, the lower earnings limit will increase from £111 to £112 from 6th April 2015. For sole traders, Class 2 National Insurance contributions will increase from £2.75 to £2.80 from 6th April 2015. Class 4 National Insurance Contributions are currently payable at the rate of 9% if your annual profits exceed £7,956. From 6 April 2015 this will increase to £8,060. The upper earning limit (at which point the rate reduces to 2%) will increase to £42,385 from April 2015 from £41,865 in 2014/2015.
There issues raised in today's statement are sure to rumble on over the coming weeks, and the fact remains that the Conservatives will have borrowed £219bn more in this parliament than they promised in 2010. What's more, a lot of the issues the freelance and contractor community had hoped to see raised (rate cuts for work hubs, for example, or tax breaks for training) were neglected. The abolishment of National Insurance for employers who take on apprentices under the age of 25 is welcome news, as is the promise of government backed loans for post-graduate students, but with HMRC's VAT MOSS issue ongoing there's still much work to be done. Head on over to the BBC and the Guardian for a further breakdown, and check in with a few of our favourite Twitter users to see what their thoughts were as the statement was unveiled.