IR35 Issues Not Dealt with in Chancellors Statement

The fact that the Government has not addressed any of the issues raised by IR35 – and in effect actually taxes many personal service companies at an effective rate of over 50% once one takes into account Income Tax, dividend tax and Corporation Taxes – just reinforces the message that this Government does not have time for the self-employed or freelance economy.

Given that economists have generally agreed that the flexible, freelance economy has been a major success factor behind the whole British economy over the past 30 years, this deliberate targeting of freelancers and entrepreneurs is a retrograde step which undermines the UK economy.

NHS spending and budget

While Jeremy Hunt’s Budget increases for the NHS – £3.3bn for each of the next two years – should be welcomed, it is also clear that these increases will not fully address the inflationary pressure faced by the Health Service.

For example, with the NHS budget in England & Wales presently costing ca. £136bn per annum, an increase of £3.3bn represents a rise of less than 3% in the NHS’s budget at a time when inflation is running at approximately 10%. As such, one can only assume the pressure on NHS resourcing and the ongoing issues that the NHS has from a staffing perspective will continue – and probably get worse – over the coming years.

The VAT threshold remains at £85,000

The fact that the VAT threshold – i.e., the threshold before businesses need to register for VAT and charge VAT to their clients – remains at £85,000 will simply discourage many businesses which could have looked to expand.

Businesses with a client base of private individuals often chose to keep their turnover below the VAT threshold, as charging VAT simply increases the core cost for private individuals. As such, businesses in this situation will have to choose between raising their fees significantly – and hence potentially becoming uncompetitive or potentially just reducing the amount of work they take on so that they can remain below the £85,000 threshold.

With many small businesses – e.g., builders – actually operated by people who are relatively advanced in their careers, it would be no surprise if many such individuals simply decided to take on less work and, for example, only work on four days per week. This could cause problems for those looking for support with building projects for example.

It’s a Budget of tax simplification – simply reduce and ultimately phase out every tax allowance – dividends allowance, Capital Gains Tax allowances, and savings allowances, among others.

The Chancellor confirmed the Government’s commitment to major infrastructure projects this morning, which will be a relief to many construction companies. Companies whose pipelines of work include contracts relating to these projects can now plan with confidence, investing in training up the next generation to their workforce as well as the plant they need, to deliver against these projects.

There are over 6000 tariff codes in existence so 100 is a drop in the ocean. Many raw materials for manufactured goods originate in China which are subject to additional measures such as quotas, safeguarding and anti-dumping measures. These limit how much an importer can bring into the country of these products – hence limited impact. Items from countries where we have FTAs are already free (EU, South Korea, Vietnam, etc.). Most raw food products are free of customs duty already. Not sure what he is hoping to achieve with that announcement.

Married Couples’ Allowance and Blind Persons Allowance – the Government will up-rate the Married Couple’s Allowance and Blind Person’s Allowance by the September CPI figure of 10.1% for the 2023-24 tax year. The Married Couple’s Allowance will be valued between £4,010 and £10,375 and the Blind Person’s Allowance will be valued at £2,870. The Government will implement these changes in the usual way through a Treasury Order.