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The new tax year is here - these four changes will affect your micro-business and contractor clients

6th Apr 2017
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Award-winning accounting software for small business owners and their accountants and bookkeepers.

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A new tax year has begun and as usual, there are a number of updates to rules and regulations that will affect your micro-business and contractor clients. Emily Coltman FCA, Chief Accountant to award-winning cloud accounting software provider FreeAgent, provides a run-down of some of the significant changes.

Responsibility for determining IR35 falls to public sector engagers

Public sector bodies, rather than individual contractors, are now responsible for determining whether IR35 applies. HMRC has released a new tool to help contractors and engagers determine whether a contract is caught by IR35. FreeAgent customers can continue to use the software to work with their public sector contractor clients by following the new workflow in the software.

Income tax thresholds changed

Changes to the personal allowance, the basic rate limit and the higher rate threshold have come into effect for clients in England and Wales:

Tax thresholds

Changes to the Scottish rate of income tax

Meanwhile, the Scottish Parliament now sets all income tax rates and bands (except the personal allowance) for your clients who are resident in Scotland. The higher rate of 40% now applies to those in Scotland who earn over £43K, whereas in the rest of the UK the higher rate will apply after income of £45K.

Your employer clients will receive Scottish tax codes for any of their employees who live in Scotland, and should use these when they run payroll.

National Insurance rates for employers and employees aligned

The National Insurance threshold is now the same for employers and their employees. The weekly earnings threshold for NI has changed too - if an employee’s income falls below £157 a week then they don’t have to pay any contributions.

To find out more about FreeAgent, call 0800 025 03900 or visit their website.

 

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