APRIL 6th 2018 - TAX CHANGES IMPACTING CONTRACTORS
IR35 and the Public Sector
If you are a contractor to the NHS or public sector departments you will most likely be effected by changes to IR35 legislation. The new legislation came into effect in April 2017 and shifted the responsibility for assessing IR35 status to the NHS or other public sectors. What that means is that many contractors will now be caught by IR35 legislation and be unable to claim all the limited company benefits previously enjoyed.
There will also be a tendency for public bodies to take a conservative approach and play safe and make an unfavourable IR35 interpretation. The other problem is that the public bodies will try to avoid working with limited companies (hassle of assessment) and the risk. So many contractors who previously had their own limited company will now have to contract through umbrella companies in order to stay in the public sector. If you are one of those effected seek sound professional advice on how best to close down/liquidate your company. We at Tax Compute can offer practical solutions.
Flat Rate VAT
Changes to the VAT flat rate scheme for the 2017/2018 tax year now mean that many contractors will no longer benefit from the scheme. Please read our article published on April 13th for a detailed explanation of the impact and changes.
You currently don't pay tax on the first £5,000 of dividends you get in the current tax year. However from 6th April 2018 the £5,000 allowance will be reduced to £2,000. For many contractors whose spouse is also a share-holder this will mean additional tax paid on £6,000 (£5,000 x 2 - £2,000 x 2). This potentially could add £2,286 (£6,000 x 38.1%) of additional tax.
Above this new allowance of £2,000 the tax you pay depends on which Income Tax band you're in. Add your income from dividends to your other taxable income when working this out. You may pay tax at more than one rate.
|Tax Band||Tax Rate on Dividends >£5,000|
Our Services to Contractors
We will always provide the tax planning needed to maximise Contractor take-home pay. We will always provide our contractors with the most effective accounting and business solutions. Our prices are just £80/month + vat for a fully comprehensive service. We do not charge over and above a flat rate of £80/month + vat which means if you have specific tax questions relating to your company it will be researched free of charge. We will also normally answer all queries the same day.
Author Roger Gunning FCMA CGMA
Tax Compute are Chartered Management Accountants regulated by CIMA. Tax Compute's offices are in Cheltenham and EC2 in the city of London. We are close to Moorgate and Liverpool Street underground stations.