PCG Managing Director, John Brazier, said that the Chancellor had delivered an intelligent budget. In his speech, George Osborne said he wanted to create stability and certainty and the PCG believes the measures detailed in the budget can achieve this.
Income and corporation tax changes will benefit PCG members and other freelancers. The PCG also supports the plan to set up an independent Office of Tax Simplification and the small business taxation review, including IR35.
However, the PCG is concerned with the uncertainty that still hangs over the public sector. The Chancellor said that the fiscal deficit would be brought into balance by 2015 and this would be achieved through 23% tax rises and 77% spending cuts.
The Lib-Con coalition is currently undertaking a spending review which is due to be delivered on October 20th. It is thought that many contracts in the public sector may end and that there will be a shortage of future Government contracts, at least in the short term.
George Osborne explained to the House that he wanted all UK industries to get the opportunity to flourish and he was particularly keen to offer support to small businesses and entrepreneurs.
His budget measures included the reduction of the small companies' corporation tax rate to 20% from next year, an extension to the Enterprise Finance Guarantee Scheme and an increase to £5m for the lifetime Entrepreneurs' Relief allowance. The main rate of corporation tax is also to decrease by 1% annually over the next four years.
Low and middle income earners will benefit from the £1,000 increase to the personal tax allowance but the increase in capital gains tax for high earners will also impact some contractors.
The main bad news is the rise in VAT which comes into effect from January 4th next year. This will affect everybody in one way or another and most contractors will probably be hit by the domestic and business VAT rates rising to 6%. The new 20% VAT rate could also affect the bottom line of financial services firms in the private sector. This would then have a knock-on effect by hitting contractors who are registered for VAT.
Near the beginning of the budget speech, Osborne declared that "Britain is open for business". Let's hope that these measures enable that to happen.
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