The mini-budget was announced on Friday, although ‘mini’ in name, the budget will have a huge impact for the contacting industry - one we have been hoping would come for years.

The IR35 (off-payroll working) reforms from both 2017 and 2020 will be reversed!

To recap, the 2017 public sector reform and the later 2020 private sector reform saw the responsibility for determining the IR35 status of a contract and making the correct PAYE & NI deductions move from the worker of the PSC to the client (if they were classed as a medium or large company).

This placed a huge burden on many businesses not only in assessments but in interpreting the rules and implementation along with an increased risk of not applying the rules correctly. From this, we saw blanket reviews of contracts being determined as inside along with companies choosing to no longer use contractors to support their workforce.  

So what’s changing?

From April 2023, the rules will revert back, so the worker of the PSC will be responsible in determining their IR35 status of each contract and ensure the correct PAYE/NI are deducted accordingly. The risk of not applying these rules correctly will also rest with the worker.  

If this follows suit as the rules have been applied previously this means:

Inside IR35: 95% of the invoice total will be processed as gross salary on which PAYE and national insurance will be payable. This does leave 5% allowance for the business for certain running costs which are still allowable under IR35 rules.

It’s worth noting as far as we are currently aware the criteria on which you assess the IR35 status is not changing.  

In the coming weeks we expect more details to be announced so will keep you updated. This IR35 u-turn will hopefully not be a case of too little too late. We have seen the contractor industry recover before and it can again this time.

If you have previously wound up your contractor Ltd company via an MVL (Members Voluntary Liquidation) then you will need to be careful about starting another Ltd Company. We will follow this blog with more information on this shortly.

A number of other key announcements were also made to help individuals cope through the cost of living crisis and boost business growth. We have summarized these below but you can read further detail in these in our other blog here.

Energy:

- Household: Previously announced energy cap for typical household at £2,500 and every household to receive £400 discount on energy bill this winter

- Business: Energy Bill Relief Scheme for business and other non-domestic customers. Discount provided on the wholesale price of gas and electricity

Business:

- Corporation Tax: Planned increase for April 2023 cancelled, meaning current rate of 19% will remain.

Personal:

- Basic Rate Income Tax: Rate will be reduced by 1% from 20% to 19% in April 2023

- Additional Rate Income Tax: To be scrapped leaving one higher rate of 40% from April 2023

- Dividend Tax Rates: Will be reduced by 1.25% in April 2023, back to April 2021 rates

- National Insurance: Reduction of 1.25% in November 2022, back to April 2021 rates

- Health & Social Care Levy: 1.25% coming in from April 2023 to be cancelled