Tax increase on the freelance consultant sector , can you make it
work to your advantage ?
As part of Government’s strategy to
reduce the national debt, a number of new taxes have been introduced,
two of which directly affect the higher end freelance consultant sector.
first will affect those consultants who bill between £400 and £500 per
day; and the second will affect all consultants billing in excess of
£600 per day.
UK earners now find themselves in the ludicrous
position that the rates of UK tax actual rise, then fall, then rise
again as earnings increase…..
* Earner at £99,950 – top tax rate =
* Earner at £112,950 – top tax rate = 60%
* Earner at
£149,950 – top tax rate = 45.2%*
* Earner at £151,000 – top tax rate =
What can I do?
There are a wide range of measures
that consultants operating via their own limited company can do to
mitigate these tax increases. Some of these measures include:
Review company structure – consider income splitting with your spouse.
Review long-term savings strategy – during this period of excessive
taxation some funds can be invested into mediums that avoid or defer
tax, including pensions and company investments.
the mid and long-term income strategy of your business. This may be an
ideal time to consider income deferral. This could also tie in with
plans to close the company and utilise Entrepreneurs relief.
Review overall company expenses policy.
This list is not
exhaustive but should serve as a prompt with which professional
freelancers can approach their technical advisors now to help get
through the mine field.
I will be posting more to do with this
subject along with advice from 3 accountancy firms, if you need help
contact your umbrella company or your accountant.