Never has a budget announcement been so pertinent to the freelance and self-employed community. With headlines across the press claiming that the chancellor has launched an all-out attack on the independent workforce, we caught up with Kenny Fitzgerald at My Accountant Friend to find out how this budget will affect his clients, and whether it’s really as doom and gloomy as the tabloids would have us believe. 
What changes did the chancellor announce this week that will affect MAF clients?
It’s important to note that most of these changes won’t come into being until 2018, so time to discuss things with an accountant and look at how things will affect you personally.
The big news, however, is as follows.
- There will be increases in National Insurance contributions for the self-employed. These will stand at a 1% increase each year over 2018 and 2019. Currently, NI contributions fall into two categories: class 2 (for those whose profits are £5,965 in a year) and class 4 (for those whose profits are more than £8,060). Come 2018, Class 2 will be removed entirely. Class 4 earners pay 9% on profits that fall between £8,060 and £43,000, and then 2% on profits that come in over £43,000.
- There will also be an increase on your personal tax free allowance, from £11,000 to £11,500, but this had been previously announced – it isn’t fresh news.
- The higher tax rate bracket has also been increased from £43,000 to £45,000, except in Scotland where they set their own rate now (it’s lower than in England and Northern Ireland).
- Lastly, changes in dividends from 2018 will result in a tax increase of £225 on the same amount of income.
Many freelancers and self-employed people feel that the chancellor “has it in for freelancers”. Does it feel like that to you?
It does appear that they are easy targets for tax collection at the moment, and with the IR35 changes in the public sector (more on which in next week’s blog), I’m afraid it’s true that there is currently a lack of pleasing news in the self-employed taxes world.
How is MAF working to aid clients and help them to be tax efficient?
As usual, we’re taking a look at the situation as it unfolds and we’re offering advice on how to be tax efficient accordingly. As most of the changes are not due to take place until 2018, we may see changes again between now and then, so we’ll be keeping on top of any updates that take place over the coming months.
There’s some talk of Making Tax Digital being postponed for 12 months. How will that help?
Yes, there has been talk of this, but I don’t see it making any big difference. To be honest, I can’t even see Making Tax Digital operating properly any time soon – the RTI system has been around a few years now, but it still has a lot of errors and issues. Since this will form a large part of Making Tax Digital, they’ll need to fix that before they can look at building anything on top of it.
