After the storm: self-employed tax planning

If you are self-employed or work via a company the winding back of many of the proposals in September’s mini-Budget have altered tax planning.

If you are self-employed or work via a company the winding back of many of the proposals in September’s mini-Budget have altered tax planning.

The  range of tax and other changes proposed in September affecting companies and employment, included:

  1. Freezing the rate of corporation tax at 19% for all companies.
  2. Reducing the basic rate of tax to 19% from 2023/24 (outside Scotland).
  3. Ending the 2017 and 2021 reforms to off-payroll working rules (often called IR35).
  4. Abolishing the additional rate of income tax (outside Scotland).
  5. Scrapping both the 1.25 percentage point increase in National Insurance Contributions (NICs) from 6 November 2022, and the Health and Social Care Levy, which had been due to start in 2023/24.

Less than a month later, the new Chancellor, Jeremy Hunt, culled the first three on this list, the fourth having been already scrapped by Mr Kwarteng. Mr Hunt might also have buried the fifth, too, were it not for the fact that the necessary legislation was just about to become law.

Mr Hunt’s reworkings of his predecessor’s plans has several implications for shareholder directors:

If you are self-employed and considering becoming a director by incorporating your business, you may also want to think again. The higher rate of corporation tax from next April, for businesses with gross profits above £50,000, has reduced the tax attractions of operating as a company.

Yet again, this autumn has highlighted the need for advice in keeping abreast of tax developments and their consequences.

Tax treatment varies according to individual circumstances and is subject to change.

The Financial Conduct Authority does not regulate tax advice.

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