After endless campaign trails and speculation, May 7, 2015, saw David Cameron return to Number 10 and resume his position as UK Prime Minister. We take a look at what a Conservative government means for your money and the plans that might be affecting you as a freelancer or contractor over the next five years.
What we know about the Conservative government’s plans
- PAYE on all earnings from April 2016 (except mileage).
- Reclaiming expenses process is yet to be defined through PAYE regulations and will be subject to a new test. If the worker fails the test, they will not be able to claim expenses, potentially including mileage. The test also applies to PSC workers (limited company).
- Workers can reclaim allowable expenses (supported by providers).
- Anti-avoidance rules make for a more level playing field.
- We are not aware of any plans to increase VAT, National Insurance Contributions, or Income Tax.
- The government plans to raise the tax-free personal allowance threshold from £10,600 to £12,500 by 2020, benefitting contractors who are outside of IR35 and on a low salary set-up. This translates to a staggering 30 million households being exempt from paying income tax by this time.
- Plans to increase the 40% income tax threshold to those earning a minimum of £50,000.
- Pledge to increase the Inheritance Tax threshold for married couples as well as civil partners, from £325,000 to £1 million.
- As a result of the coalition coming to an end, ‘Bedroom Tax’ is likely to remain in place.
- Cuts to the Pension Lifetime Saving Allowance from £1.25 million to £1 million are set to take effect in April 2016.
- Jobs tax for under-21s may be abolished making it easier for young people to get their foot on the career ladder.
- A review will be opened into the disadvantages faced by those who are self-employed, including maternity pay, mortgages, and pensions.
What we don’t know yet
- The details surrounding the tests that determine whether an expense can be reclaimed.
- New PAYE regulations that define the reclaim process.
- The scope and timing for a BIS review on the transparency of providers
- No word yet on whether IR35 will be overhauled under the new Tory government. Stay tuned for more information.