Home / News  /  Budget is a boost for economy through help for entrepreneurial micro-businesses, but has “sting in the tail” for many contractors says cloud accountants Pandle

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Budget is a boost for economy through help for entrepreneurial micro-businesses, but has “sting in the tail” for many contractors says cloud accountants Pandle

Lee Murphy, the founder of cloud accounting software Pandle (www.pandle.co.uk), an accountant and tech entrepreneur, said: “Brexit is bearing down on us, whether it is next March or drifts off to later in the year, and there were some good measures to make sure the most flexible and successful sections of the economy are able to fire on all cylinders to offset any temporary shock to the economy from leaving.”

Welcome boosts for innovation and smaller businesses

Lee Murphy said: “There were quite a few announcements by the Chancellor of existing measures that help smaller businesses being extended, such the Annual Investment Allowance going up to £1million and Start-Up Loans continuing to 2021, that will help entrepreneurs.

“The cut in rates bills for retailers will also be a welcome move for small retailers to give them some respite against the move to online shopping, and the cut in the cost to small businesses of having apprentices is also very important.  We need to be investing in a more skilled workforce for the future, and this helps small businesses provide take on and train our future talent, as in the additional investment in tech and help for getting skilled people

“The reliefs combined with good news around tax free allowances going up and the fuel duty being frozen, mean that the Budget offered many useful benefits for microbusinesses and entrepreneurs”.

The big losers from the Budget are contractors

Lee Murphy said: “Contractors were the big losers from the Budget as the new taxation regime, known as IR35, is to be imposed on them from April 2020.  The Chancellor implied some would escape it as it will only apply to large and mid-sized businesses, but the reality is the vast majority of contractors work for such organisations, not small businesses.

“Effectively contractors, especially highly skilled IT ones, will be forced to join ‘umbrella companies’ and pay more tax and national insurance.”

For instance, we calculate that a self-employed contractor currently earning £50,000 per year, will typically take home £43,670 after tax, national insurance and other costs.   They will now be compelled to go through an umbrella company, meaning their take-home pay will reduce to £37,696 because of extra because of increased tax and national insurance costs.

For a contractor on £90,000, the hit is even worse, with their take-home reducing from £70,037 to £60,949.

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