Rishi Sunak opened his statement by admitting there was likely to be a temporary disruption to the UK economy due to COVID-19, admitting that the budget was being delivered during a challenging period.
But, the question in every contractor’s lips is how the 2020 Budget will affect them. In this article, Umbrella Supermarket outlines the main take-aways every contractor can take from the 2020 Spring Budget.
The great news for limited company contractors who don’t receive statutory sick pay is that
the Chancellor today announced that the government will be injecting £7 billion to supporting the self-employed, businesses and vulnerable people impacted by coronavirus.
The Chancellor announced that workers who don’t receive sick pay will now be able to more easily receive benefits, which they can claim from day 1 rather than day 8. This means that any time contractors may have to take off from work due to sickness will be covered.
Sunak also proposed that it will be far easier to get a sick note, which can now be gained by calling 111 rather than visiting a doctor’s surgery. And finally, the minimum income level will temporarily be removed from universal credit.
The self-employed will also be allowed to defer tax payments over an agreed period of time, meaning any contractors kept off work due to coronavirus will be able alleviate the pressures of tax payments.
This is all good news for self-employed contractors whose work may be badly impacted by the outbreak of COVID-19.
In its current state, Entrepreneur’s Relief lets company owners close or sell their business, extracting the respective capital gain at a reduced rate of 10% rather than 20%.
Initially introduced in 2008 to encourage entrepreneurship, the allowance has since been raised three times. However, it has come under criticism for being expensive and ineffective, with claims that it merely stands to benefit the rich. In fact, the Chancellor today labelled the legislation expensive, costing over £2bn a year, ineffective and unfair - with just 5,000 people getting the most of the benefit.
Entrepreneur’s Relief has been of increasing relevance to limited company contractors, many of whom may have to dissolve or sell their businesses once impending off-payroll regulations come into play next month.
With rumours that the Relief might have been scrapped altogether in the 2020 Budget, many contractors have been keeping a keen eye on any changes to the Relief which in its current state can help many close their business in a tax efficient way.
Although the Chancellor has come under pressure to completely abolish the Relief, he today announced in his statement that rather than scrap it completely, he would instead reform it. Sunak stated that he would reduce the life-time limit from 10 million to 1 million, leaving 80% of small business owners totally unaffected by these changes while saving the government £6bn a year.
Again, this is good news for contractors, with the majority being unaffected by the reforms. The key take-away for limited company contractors is that many can still rest assured they can make use of Entrepreneur’s Relief when winding down their limited company business.
IR35 has been at the forefront of contractor’s minds for the past couple of years. The off-payroll rules, which change the way IR35 is applied, have been at the centre of much criticism and debate. Despite which, the changes are set to be rolled out to the private sector from April 2020.
The changes to IR35 will shift the responsibility of assessing a contractor’s IR35 status to the end-client. If the end-client deems a contractor to be ‘inside IR35’, the fee-payer, which is usually a recruitment agency or client, is then responsible for deducting income tax and National Insurance contributions from the contractor.
Although clients are obliged to take reasonable care when assessing whether a contractor falls under the remit of IR35, many larger clients are making the move to simply stop utilising the services of limited company contractors altogether. Late last year Barclays Bank announced that it would no longer use the services of contractors operating through limited companies, and businesses including Lloyds, HSBC, RBS and others have since followed suit.
Using a variety of means, the end-client will determine a contractor’s status by looking at the terms of their contract and their working practices, before issuing a Status Determination Statement.
The Treasury expects this measure to net £1.3 billion a year by 2023.
A review of the heavily criticised reforms was promised by previous Chancellor, Sajid Javid, during the run up to 2019’s general election. This review was subsequently launched in January 2020, but in the end was stripped back to be a mere review of the implementation of the reforms. Although Javid has since stood down from his post, many expected the much talked about IR35 to be discussed in Sunak’s 2020 Budget.
Despite the significant impact that IR35 will have on thousands of contractors, new Chancellor Rishi Sunak failed to mention any changes to IR35 in his statement. Obviously, this comes as a blow to thousands of contractors operating through limited companies that will be hit by changes.
There is plenty of good news for contractors set out in the budget – such as limited reforms to Entrepreneur’s relief and the temporary introduction of benefits for those impacted by coronavirus. However, there was also bad news as the Chancellor failed to mention any changes to IR35 legislation which will have damaging effects on thousands of limited company contractors in the UK.
With that in mind, as of 2020, it may be the more beneficial and tax efficient option for contractors to operate under an umbrella company, in turn receiving statutory sick pay in case they are affected by coronavirus, ensuring they lie ‘inside’ IR35 and to take care of paperwork, tax and admin for them.
If this applies to you, Umbrella Supermarket are here to make the process easier. After all, not all umbrella companies are created equal. With our handy umbrella company comparison tool, we help contractors find the best umbrella company for them based on their requirements – whether you’re after more money or for some help with child credit, we make the transition quick and easy.
Any contractor considering switching to an umbrella company will want to know how to find the best provider to work with.
Although you could spend your precious time and energy searching the web for the best umbrella company, there is an easier way – using an umbrella calculator.
In this guide, Umbrella Supermarket explains why every contractor should use an umbrella calculator in 2021.
If you are considering contracting you will need to decide on PAYE or umbrella.
It can be a difficult decision to make and contractors will inevitably be questioning which option will be the best for them.
To help every contractor get on the right track for them, in this guide Umbrella Supermarket looks at PAYE vs umbrella, outlining the key differences and how this will impact you.
There are many reasons that contractors across the UK opt to work under an umbrella company.
Umbrella companies offer an easy way to contract and remove the need for the contractors to worry about the burdens of admin, finances, tax and IR35, all things that limited company contractors have to deal with.
For this reason, many contractors will be weighing up their options and questioning whether it is worth using an umbrella company in 2021. To help make the decision that little bit easier, Umbrella Supermarket has put together this guide on the pros and cons of using an umbrella company.
Any contractor that is considering operating through an umbrella company in 2021 will need to understand Umbrella Company fees - from why an umbrella company charges fees, how they are paid to how much the contractor will pay.
In this guide, Umbrella Supermarket answers those all-important questions to help every contractor know exactly where they stand when it comes to umbrella company fees.
If you’ve made the decision to contract through an umbrella company in 2021, you will next need to find an umbrella company that’s right for you.
After all, there are lots of umbrella companies out there, so how do you know which one to choose?
To help you find the best umbrella company for you, in this guide Umbrella Supermarket outlines what makes a good umbrella company, so you can rest assured you’re making the right move.
One of the many advantages to operating through an umbrella company for contractors is that they become an employee of their chosen provider.
In turn, this means that the contractor will be automatically enrolled onto the umbrella company’s workplace pension scheme.
To help contractors find out more about umbrella company pensions Umbrella Supermarket has put together this handy guide.
If you are considering contracting through an umbrella company you will naturally have questions and queries over how they work.
After all, making the move to umbrella can be a big step for contractors. To help, in this guide Umbrella Supermarket explains how to get started with an umbrella company and share our top tips for using one in 2021.
PAYE or umbrella is a question asked by every contractor. Which one you opt for will have a big impact on your contracting career and lifestyle. So, it's important to make the right decision for you.
To help makes things a little bit easier, Umbrella Supermarket has put together this guide on PAYE or umbrella, outlining the key differences between each, to help you make the best and most informed decision for you.
One of the many benefits to working through an umbrella company is that you will receive holiday pay as well as a range of other statutory benefits including sick pay, maternity and paternity pay.
To find out more about umbrella company holiday pay, and how to calculate how much you will be entitled to, Umbrella Supermarket has put together this handy guide.
Contractors must make several decisions throughout their contracting careers. One big decision contractors have to make is how they will operate.
One way that contractors can work is through an umbrella company.
Umbrella companies have become an increasingly popular way to contract in the past few years, offering many benefits to the contractor. But, how do you know whether this option is right for you?
To help every contractor make the right decision for them, in this guide, Umbrella Supermarket explains when not to use an umbrella company.
There are tons of benefits to using an umbrella company, which is why they have become such a popular option for contractors in recent years.
After all, an umbrella company takes away the stress and hassle of operating through a limited company whilst offering contractors a range of advantages, such as statutory rights, paying them a salary, deducting correct tax levels and National Insurance, and taking care of tasks like expense processing and invoicing.
However, as more and more contractors opt to use the services of an umbrella company, more providers have started to claim that they are HMRC approved.
To bust the myths around HMRC approved umbrella companies and get straight to the facts, in today's guide Umbrella Supermarket look at whether HMRC approved umbrella companies really exist, so you know exactly where you stand.
If you're considering making the leap to contracting, you will understandably want to know how much you will have to pay in umbrella company costs. After all, this amount comes directly out of the contractor’s pocket, so it’s important to be clued up on how much you should expect to pay.
To help contractors, in this guide Umbrella Supermarket answer the all-important question of how umbrella companies cost in 2021.
