So what are the implications for
freelancers, and how can you make the most of your
While many commentators have stated that this
budget contains little to excite freelancers, it's worth
remembering that there is equally little to worry about - and
that's definitely a good thing for contractors already fighting for
For example, IR35 remains unchanged - possibly as a sign that the government has bigger issues to worry about. Corporation tax is also unchanged until 2010/11.
Business Payment Support Service
If you're dreading the end of year tax bill,
worried that you don't have sufficient cash, fear not: you will be
able to spread the payment of your taxes across a time frame that
you can afford.
This HMRC service has now been expanded to allow businesses expecting to make a loss to offset them against tax due on previous year's profits if they are unable to pay.
Benefits - Effectively worth more
If work dries up and you need to claim Jobseeker's Allowance while between contracts, you'll be pleased to hear that the value of this benefit is being maintained. Because the economy is in a period of deflation, the benefit is effectively more valuable.
A new 50% tax rate for those earning £150,000 or more has been introduced. And for people earning over £100,000 the personal allowance will be reduced by £1 for every £2 of earnings over £100,000.
The Alternative to Higher Taxes
While many contractors will not be fortunate
enough to be concerned by the new 50% tax rate, all will be keen to
retain as much of their earnings as possible - particularly at a
time when contracts are increasingly scarce.
Employee Benefit Trusts (EBTs) are one way to reduce your tax bill. With EBTs, contractors can retain as much as 85% of their earnings. And with the continued scrutiny of umbrella companies by HMRC, EBTs are fast becoming the legal, compliant and tax efficient way to organise your freelance finances.
This page was supplied by Bedouin Group. The Bedouin Group provides a unique structure for contractors and temporary workers allowing them to receive more money in their pocket for the hard work they perform.
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Image: Naughty cat by kevindooley