Lincolnshire-based chartered accountants Nicholsons say this year’s Budget shows the growing importance of Britain’s self-employed workers to the economy.
The Chancellor, George Osborne, went into the Budget promising “no giveaways, no gimmicks”, but it soon became apparent in his speech that many of his proposals would be widely welcomed.
One of the biggest groups to benefit was the self-employed, whose numbers are the highest in more than 40 years. In order to appeal to this growing group of entrepreneurs, Mr Osborne announced that Class 2 National Insurance Contributions would be abolished for self-employed workers by the end of the next parliament.
The Chancellor also announced that the annual Tax Return will be replaced with a new “simplified” online tax account.
Mr Osborne confirmed that the Government would reduce Corporation Tax to 20% – one of the lowest rates of any major economy in the world and he promised a “radical” and “wide-reaching” review of business rates, which will lead to a reform of the system that will benefit most businesses.
The Chancellor also announced a significant reform to help the struggling farming sector. He said that farmers would be allowed to average their incomes for tax purposes over five years instead of two – a move expected to provide the UK farming community with £100 million in tax savings.
However, it wasn’t only businesses that benefited from this year’s Budget. As part of ongoing changes to the pension system in the UK, the Chancellor announced that individuals with an annuity would be able to choose to cash this in for a lump sum. The change will come into force in April 2016 and will mean that people are charged at their marginal rate of tax on any money they withdraw from this lump sum. The intention is to allow annuity holders to put themselves in the same position as those who haven’t yet taken their pension benefits. The personal lifetime pension allowance for individuals will be reduced from £1.25 million to £1 million.
Savers will also welcome the introduction of a new personal savings allowance, meaning that from April 2016 the first £1,000 of the interest earned by basic rate taxpayers on all of their savings will be tax-free. Higher rate taxpayers will also enjoy the same tax-free status on interest earned; however their allowance will be set at £500 to reflect their personal assets.
Richard Grayson, Managing Partner at Nicholsons, said: “The self-employed are the ones who will really benefit from this latest Budget, which recognises the contribution they make to the economy.
“Becoming an entrepreneur is not a simple choice to make and often small businesses can run into financial difficulty that they struggle to recover from. If you would like advice following this year’s Budget proposals then contact us for help.”
