The Mini-Budget took place on Friday the 23rd of September 2022, with the new Chancellor Kwasi Kwarteng claiming that these were the biggest tax cuts in a generation.
Here we take a look at what you need to know as an umbrella company contractor:
For umbrella contractors, the rise in National Insurance earlier this year came as a double blow due to the way an umbrella company works.
This is because there’s not only the employees NI rise to take into consideration, but also the increased costs that will come from their umbrella company’s overheads (due to the company paying out more for inflated Employer NIC).
From the 6th of April 2022, NICs rose by 1.25% in order to not only help the NHS to recover from the pandemic, but to fund the UK’s health and social care too.
This increase was then going to be separately deducted as part of the Health and Social Care Levy from April 2023, however, the new Chancellor has decided to reverse this temporary increase with rates going back down from the 6th of November 2022.
In the 2022 Spring Statement, the announcement of a 1% reduction in income tax was met with some disappointment due to it not coming into effect until 2024.
However, the plan to cut income tax from 20% to 19% has now been accelerated to come into effect in April 2023.
With energy being a hot topic, especially in the lead-up to winter, the government announced a freeze on energy bills and claimed that this will help to reduce inflation.
For the six months starting from October, the total cost of the energy package is expected to be approximately £60 billion.
Businesses will also receive help during this time in the form of the Energy Bill Relief Scheme.
Although not directly affected, umbrella company contractors might be interested to learn that the IR35 legislation is to set to see some changes, with the government confirming that the rules are to be simplified.
Previously, it was the responsibility of the client to determine a worker’s status, however, from the 6th of April 2023, workers will once again be able to decide their own employment status, meaning that they will be responsible again for paying the correct amount of tax and NICs.
Commenting on the IR35 changes, Zeeshan Anwar, Head of Compliance at Contractor Umbrella, said, “It’s a pleasant surprise that the new Government has moved so swiftly in repealing the off-payroll reforms, and undoubtedly this will make the whole contractor industry very happy.
“The reforms made contracting complex and burdensome, and going back to the old rules should bring some simplicity back to the sector. The industry has time, until April 2023, to ensure compliance with the IR35 rules and I’m hoping that end clients, recruitment businesses, and indeed the public sector rethink their positions regarding limited company contracting and not be so detrimentally cautious like before.”
For more information, take a look at our Mini-Budget 2022 summary.
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