Contractors in 2019: Trends to look out for in 2019
A new year is an exciting time. New resolutions are made (and sometimes quickly broken), and new career goals are planned. If you’re an experienced contractor, you may be looking to branch out into a new area, or if you are new to contracting, you may be looking for your first contract. Whatever stage you’re at, a new year can also bring new rules and regulations that can impact your earnings.
Here is a summary of the tax regulations that you need to be aware of during 2019 and beyond.
2019 Loan Charge
One of the most significant pieces of legislation that comes into effect from April this year is the 2019 Loan Charge. This legislation will affect any contractor who has willingly or unwittingly used disguised remuneration schemes to reduce their tax liabilities.
These schemes allowed contractors to take out loans from the business (with the majority of these loans not being repaid) instead of taking a salary which could be subject to Income Tax and National Insurance Contributions.
The 2019 Loan Charge legislation will impact those who:
- Arranged a loan on/after 6th April 1999, and where part or all of the loan remains outstanding as of 5th April 2019
- Arranged a loan on 5th April 1999 and who would have fallen into the new disguised remuneration legislation
The most significant part of the legislation is that HMRC has the power to tax members of such schemes dating back 20 years. If you think, you may be affected by the 2019 Loan Charge, contact us immediately to find out what steps you need to take next.
Private sector contractors
During the last Budget, the Chancellor finally confirmed the news that many had been speculating would happen – IR35 reforms will be rolled out to private sector contractors. From April 2020, contractors who work with medium or large businesses will no longer be responsible for determining their own IR35 status. This responsibility will shift to the end user – the client or agency.
If it’s deemed you are working inside IR35, you will be taxed at source, similar to how an employee is taxed. If you’re impacted by this, we calculate it could reduce your take-home pay by as much as 25%.
Making Tax Digital
From April this year all businesses and organisations that are VAT registered must start to maintain digital accounting records. If you have been using a paper-based system, from April this year you will no longer be able to continue with this. Additionally, you must start submitting your VAT returns to HMRC using a functional and compatible software. Or, you can choose to appoint an agent to manage this on your behalf.
If you’re interested to find out how we can help you with this, give us a call on 01962 867550.
Dividend Tax
During the budget that took place on 29th October 2018, we held our breath to see if the Chancellor would announce any further changes to the Dividend Tax. Luckily, he decided against reducing it any further, so for now, the Dividend Tax stands at £2,000, after having been reduced from £5,000 at the start of the 2018 tax year.
Finding your away around the numerous tax regulations can be daunting. If you would like to discuss any of the points mentioned in this article in further detail, please contact one of our directors on 01962 867550. Or, if you would further information on our monthly accounting packages, send us a message via our website and one of our directors will give you a call back.
Note: All the information and advice in this blog post was correct at the time of writing.
