2018 was an eventful year for contractors. Above all, it’s likely to be remembered by many as the year the government confirmed IR35 reform will be extended to the private sector in 2020.
IR35 developments aside, 2018 also saw the arrival of a number of tax changes, which were introduced at the start of the financial year in April. These included; the unpopular reduction in tax-free Dividend Allowance (from £5,000 to £2,000), the welcome rise in Personal Allowance (from £11,500 to £11,850) and the well-received increase in the higher rate income tax threshold (from £45,000 to £46,350).
But 2018 is far behind us and we’re well into the New Year. This year, in addition to personal and company tax returns and further tweaks to income tax rates, there are a number of other key dates and developments that contractors should keep an eye on.
Is February too late for a look forward at the changes afoot? We think not! Here’s all you need to know:
The Self-Assessment Tax Return
Nearly all contractors will need to complete a Self-Assessment for income earned in the 2017/18 tax year. The deadline for paying HMRC any income tax and national insurance that you owe falls at midnight on 31st January 2019.
If you missed this, HMRC fines start at £100 and will increase after three months.
The IR35 consultation
As part of the Budget announcement on IR35 reform in the private sector, the government said it would publish a consultation document in early 2019. This could be an important moment for contractors, who remain unconvinced that their clients will be able to accurately determine IR35 status when the responsibility shifts from the individual to the engager in 2020.
The consultation findings will ‘inform the Draft Finance Bill’, which will provide further detail about incoming IR35 changes. It’s also expected to shed light on the government’s plans for improving HMRC’s IR35 testing tool, CEST.
The UK officially leaves the EU
At 11pm on 29th March 2019, the UK will officially leave the European Union. At the time of writing, what effect this will have on contractors working in Europe and on UK projects with European clients is unclear at best.
A transition period has been agreed, which will see the UK stay in the Single Market until the end of 2020. By then, there should be a trade deal in place that sets out the business and travel agreements between the UK and the EU after Brexit.
The financial year ends and begins
The 2018/19 financial year ends on 5th April with the new one starting a day later, when a number of changes announced in the Autumn Budget will be introduced.
It’s mostly good news for contractors though. In the 2019/20 financial year, Personal Allowance will increase once again (from £11,850 to £12,500), while the higher rate income tax threshold will also rise significantly (from £46,350 to £50,000). For a full breakdown of the changes and to find out what they mean for contractors, take a read of SJD’s Autumn Budget Key Takeaways.
The draft Finance Bill arrives
Much like the consultation findings, there isn’t an exact release date for the draft Finance Bill, which will outline the specific details around IR35 reform. But this isn’t unusual. HMRC has said it will be published in the summer and it’s expected to contain extensive information on the implementation of IR35 changes in the private sector. SJD will also provide an in-depth analysis when it’s released.
The Autumn Budget
The Budget nearly always takes place towards the end of November, but in 2018 it was brought forward because of Brexit discussions. Each year, the Chancellor will unveil the government’s spending plans, along with any financial reforms.
It’s almost unheard of that a Budget passes without an announcement being made that doesn’t impact contractors. In the last one, Philip Hammond confirmed IR35 reform, but it would be surprising if the government announced anything as significant in 2019. The chances are that it will be largely Brexit focused.
Corporation Tax return
As a limited company contractor, in 2019 you’ll need to pay Corporation Tax (19%) on any profit your business has made in its previous financial year. For most contractors, this is payable nine months and one day after the end of your company’s accounting year. But if you’re still unsure about when this is, you can find out more information here.
Quarterly VAT returns
Next year, if you earn above £85,000 in any twelve months or think you might in a 30 day period, you need to register for VAT.
At this point, your business will be required to pay a quarterly VAT return to HMRC. The date you need to make this payment depends on your VAT accounting period end. If you find any of it confusing, it’s worth reading SJD’s Introduction to VAT.
Find out more
From IR35 reform, to Brexit and bookkeeping, there is plenty for contractors to get ready for in 2019. As always, we’ll keep you informed about the latest and breaking news that affects you and your business in our news centre.