The UK’s “life blood” take a hammering from the Chancellor.

Wednesday was a dark day for the “life blood of the UK economy”. The self employed - all 4.8 million of them - were dealt the bad news of a reduced dividend allowance and hikes in National Insurance Contributions, as well as (brief) confirmation of the public sector IR35 reforms.

These announcements will hit many contractors hard, especially as the Government have been slow to offer any promises to offset these additional costs in the near future.

We have been widely quoted as saying that yesterday’s announcements are deeply concerning and that the Chancellor has demonstrated that the Government doesn’t recognise the value of the UK’s self-employed. We feel that the insistence on reducing the gap in terms of tax paid between the employed and self-employed undermines the risks the UK’s contingent workforce undertake.

So what’s in store for Contractors and IR35 reforms?

With only brief mention of the IR35 changes in his speech, we are really no further forward. As of Wednesday, the client is still responsible for determining a contractor’s status but any recruitment agencies in the chain are responsible for calculating tax at source via PAYE.

For us at ContractorCalculator, this decision is nonsensical. Agencies are being asked to take the entire tax risk based on a decision that they do not make themselves. And this doesn’t make sense.

And there’s more... the tax free dividend is cut by more than half

With the self-employed contributing more and more to the economy, the Government’s decision to hit limited company contractors with a dramatic slash in their tax-free dividend allowance is a mystery. The cut from £5,000 - £2,000 from April 2018 will mean a tax increase of £225 for limited company contractors.

So, is there a future for Contractors?

This years spring budget certainly seems to imply that the government have got it in for contractors.

We spoke to Chris Bryce, chief executive of the Association of Independent Professionals and the Self Employed (IPSE). "If you are one of the hard working self-employed people who face a significant increase on your tax bill, you might feel that the Chancellor has it in for you. He shouldn't forget that growth in self-employment has driven our labour market in recent years and punitive rises in tax will make many people have second thoughts about striking out on their own.”

A sobering thought for us all.

About Contractor Calculator - We’ve been online and independent since 1999. Still owned by founder and former IT contractor Dave Chaplin, the site has grown dramatically since then to become the expert guide to contracting. The team have created a free independent IR35 testing tool to enable contractors and agencies to ascertain their IR35 status. Developed with input from employment law status experts, the IR35 Test was first released on ContractorCalculator in 2009 and has already been used by over 100,000 contractors. To reduce your risk of investigation and tax liabilities visit www.IR35testing.co.uk to take your free test now.