The Fizz! Blog

You buy things to pay MORE tax, not less

You quite often get asked by clients “should we buy some more equipment to save some tax”?  It’s an understandable question - but we’d say it’s exactly the wrong perspective to look at things from.  You should spend money in your business with the intention of paying *more* in tax, not less.

If you buy some bit of machinery or other, then probably it’s because it’s going to make your business more productive, or it’s going to maintain productivity by replacing something else that’s knackered.  If paying £10,000 for this thing ends up making your company an extra £80,000, then it’s better off by £70,000 overall.  The machine hasn’t saved you any tax at all.  In fact, it’s cost you £14,000 of corporation tax!  But that was the whole point of buying it - you bought it to maintain or increase profits, and bigger profits lead to bigger tax bills.  Bigger corporation tax bills are good because they mean profits are bigger and dividends available to owners are bigger.  Anyone who is disappointed that their company’s tax bill has gone up year-on-year probably hasn’t fully grasped how the pieces fit together.

Imagine taking on a new marketing person and paying them £40,000 a year.  In their first year, they bring in enough new business to pay their salary AND contribute another £250,000 of profit on top.  You’re hardly going to fire them because they’ve cost you £50,000 of corporation tax, we hope?  If you look at it from a tax saving point of view, then perhaps you’d prefer that they brought in nothing at all, thereby saving you £8,000 of tax on their salary!  But that’s probably not what you really want.  Actually you’d love them to cost you even more in tax!

Of course, there can be broader “value” than just stark financial benefits.  The value in a purchase might be in making your working life more enjoyable or fun, perhaps.  When we first moved into our current offices, we paid £3,000 or something for a big table and some benches.  Did we do it because we thought it’d directly lead to £3,000+ of extra profit?  No.  But did we do it because it would save us £600 of tax?  Also no.  We did it because we thought it looked cool and it would be quite functional in our workplace and we really liked it.  We still do!  We’re content it’s paid for itself - and would have done regardless of any tax saved or not saved.

So next time, think about asking yourself “Is this purchase going to increase my tax bill?”.  And if the answer is yes, go ahead and make it!

www.fizzhq.com

December is for December things, January is for January things

We were talking with a potential client a few weeks ago.  We’d closed the door to accepting new limited company clients with 31 March 2021 year-ends at that point – they need their accounts and tax returns done by the end of December, and we’re comfortable that we’ve enough to fill the month as it is.  We’ve some existing clients with that year-end where everything still needs to be finished and signed off before the end of the month.  We’ve clients where we need to help them prepare for their approaching 31 December year-end.  There are Self-Assessment Tax Returns to do (we’re pretty good at getting those done well before the 31 January deadline, but end up doing plenty in December and January anyway).  And we’ve got other underlying work too.  So, if we took anything new on, we’d have to drop or delay something that we’re currently intending to do in favour of the new commitment, or work overtime, and we don’t want to do either of those things.

In this case, the potential client didn’t mind if we didn’t do his accounts in December.  He was happy for us to do them late, in January, and he was willing to pay any fines that arose as a result.  The problem is, we’ve January things to do in January.  Self-Assessment Tax Returns are a big thing of course.  Well, can’t we do it in February or March?  We’re doing February and March things in February and March (the first week of February is very committed to VAT return work because of the tax return focus in January, and then we’re spending a lot of time both on preparing our clients with 31 March 2022 company year-ends (which is most of them) for their year-end, and checking in on their tax planning for this year to check that they’re going to be where they want to be by 5 April.

And in April, guess what?  We’re doing April things, and so on and so on.

From the outside, it’s a completely understandable and reasonable request to chuck a bit of work into the machine at a point where it doesn’t naturally fit.  There are certainly accountants who do see their work as more of a transactional conveyor belt where the work is the work, and you can just add it to the queue.  But for firms like us, accompanying clients through the year in a considered way, then – unless the firm happens to be running below capacity - it unfortunately just doesn’t work.  You need to try and jump into the machine at the right time (which, for a limited company, is very likely to be before its year-end, not after it!).

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I'm a limited company owner - how do mortgages work?

One of the most common concerns that people have when starting to work through a limited company is mortgages. In particular, they worry that the typical way in which limited company owners get paid - a relatively small PAYE salary with most income coming from dividends - will mean they can only take out a tiny loan based on the salary part. If you’ve obtained a mortgage before and the lender principally wanted to see your payslips, that’s quite understandable!

The good news is - that isn’t the case. No lender looks at a company owner’s salary and their salary alone.

Historically, when looking at the borrowing capacity of a limited company owner, lenders would disregard entirely how much money the owner was extracting from the company, by whatever mechanism. Instead, they’d look beyond the owner, and look at the underlying profitability of the company and how much the owner *could* take out. The amount they’d lend would be based on the underlying profits of the company, not the tax-planning decisions of its owner.

Then came the financial crash of 2007-08. Lenders panicked, and decided that any profits you were sheltering inside your company for the future were technically at risk if your company went bust, and so they’d only lend based on how much you were actually taking out. They didn’t care about the split between salary and dividends in the slightest, so that mix of a small salary and bigger dividends wasn’t affected, but it did mean that there was a period when some company owners did have to take bigger dividends out of their company than they really wanted to in order to satisfy the requirements of a bank or building society.

For a long time now, we’ve been on an even keel again. The vast majority of lenders have gone back to the old basis and are interested in how much you *could* take from your company, not how much you *do* take. There are one or two who still consider only what you’ve actually taken, but they’re few and far between and it only really matters if you’re with one of them already and are keen to remortgage with them. And none of them care about the split between salary and dividends.

It’s admittedly generally a slightly more time-consuming process for a limited company owner (or any other self-employed person) to get a mortgage offer than it is for a PAYE employee.
Lenders all cleave to the idea that an employee is inherently a less risky proposition than a business owner and ask for less evidence of income from them. This is clearly preposterous - a full time employee’s income could disappear overnight if they lose their job or their employer goes out of business, whereas many people who work for themselves are getting income from multiple customers, which is clearly less perilous. On the other hand, to be fair to lenders, assessing the stability of each applicant’s job and employer robustly would be unfeasible.

And for a self-employed person to be able to choose from a wide range of lenders and deals, you’re probably going to want to have a couple of years of business under your belt - one set of accounts will get some lenders interested, but two will increase the number. That can sometimes rationally lead to people staying in PAYE employment (or as a sole trader), a little longer than they might otherwise do, so as to be able to get a mortgage or remortgage before beginning to work through a limited company and restarting that two year clock.

But that’s just the way it is. It does mean that a limited company owner is generally well advised to work with a mortgage broker who is experienced in working with self-employed people. They’ll know which lender is interested in which kind of borrower right now, and what kind of evidence of income each is looking for. You can’t prepare some kind of standard “pack” that’ll be presented to any lender. Most of them are likely to require a certificate or reference from your accountant vouching for the numbers - and they all have their own format!

But there’s no need to worry that a limited company owner is at a serious disadvantage when it comes to mortgages. They get them every day.

www.fizzhq.com

Investing in cryptocurrency? Here’s how the tax side works

Cryptocurrency and tax has fast gone from being a largely theoretical subject to a quite practical one. Buying and selling them has become both more popular and more easy, and far more people are having to address the consequences of the activity now.

So, how are profits on selling cryptocurrencies taxed on an individual?

For 99.99% of people it’s a Capital Gains Tax (CGT) matter. CGT is fundamentally a tax on disposals (i.e. sales) of assets. The principles and calculations are the same ones you’d follow when figuring out CGT on profits from selling shares. Most people seem to assume that the fluctuating value of their cryptocurrency during the year has some impact, but it doesn’t. Similarly, often people think that the value of what they hold at the end of the tax year makes a difference, but it doesn’t. If you don’t sell any cryptocurrency, there’s nothing to declare and no gain to tax. It doesn’t matter if you bought it for £10,000 and it’s now worth £200,000. It’s not until you actually sell something that tax becomes a consideration.

A useful thing to bear in mind is that we can all make some capital gains free of tax each tax year. For 2021-22, your first £12,300 of capital gains are tax-free and it’s only the surplus above that amount that’s taxable. If your gains are below £12,300 and the total proceeds are less than four times that amount - £49,200 - then you don’t even need to tell HMRC about the transactions at all.

So, what are those principles?

Let’s say you sell some Ethereum for £15,000. You need to figure out how much it cost you. This might be quite simple. If that’s all the Ethereum you have, and you bought it all in one go for £7,000, you’ve a profit of £8,000 to be taxed. Easy!

What if you didn’t buy it all in one go? If you’ve bought Ethereum on two or more occasions, you have to keep track of all the times you bought Ethereum, and keep a running record of the average cost of each unit - a record of your “pool” of units and their average cost. Then, when you sell X units, you need to take the relevant number of units at the average cost out of the pool, and figure out the profit you made on selling them. Fairly easy!

There’s a further complexity, though. Sometimes you have to look at the units you bought afterwards as well. This is because of rules designed to stop people realising tax-free profits at the end of one tax year and then buying the same things back a day or two later at the start of the next. In our example, if you buy some Ethereum in the 30 days after you sell some, then you need to match that purchase against the disposal instead of the older units, and for tax purposes you’ll still be deemed to hold those older ones at their original cost. Not easy!

These rules are thorny enough for share trades, but there are a few factors that make them trickier still for cryptocurrencies:

1. Cryptocurrency transactions are often far more frequent. When you sell some shares, it’s usually fairly easy to identify when you bought them and how much for, and to therefore work out the profit you’ve made. With cryptocurrency there are often far more transactions to assess (though in fairness this may become more common in share trading too, as apps and push notifications encourage people to trade more frequently).
2. Most people do their share trading via a single broker account, but many people have multiple accounts/wallets for cryptocurrency. You might need to match a sale of cryptocurrency from one wallet against a purchase made via one or more other wallets.
3. A big trap is that you might not even dispose of cryptocurrency for actual money. If, say, you exchange some Ethereum for some Bitcoin, that represents a disposal of Ethereum to declare and pay tax on, even if you’ve no GBP to show for it. Someone may never have cashed out any cryptocurrency at all, but still have multiple taxable disposals. We’ve written about this before.
4. Similarly, you may use some cryptocurrency to pay for something - that represents a disposal of the cryptocurrency at its market value and a potential tax bill.
5. Finally, even if you gift the cryptocurrency to someone, that’s also a disposal at whatever its market value is at that point (unless you're gifting it to your spouse or civil partner, anyway), with tax to pay if you’ve made a gain - that’s the same with shares and any other assets too.

All this means that, for someone with complex cryptocurrency activities, some software that can pull everything together is likely to be necessary!

For the time being, the £12,300 annual exempt amount is likely to keep most people from having to report anything to HMRC (though if you make losses you might want to report them, so you can offset them against future gains). Even so, make sure you keep proper records - if you’ll be selling cryptocurrency in future it’s important to have your precise trading history on record so that you can figure out the profit on each disposal when the time comes.

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Bounce Back Loans – what are your options under Pay As You Grow?

Last month was the first big month for businesses to begin paying back Bounce Back Loans.  There were a few really early applicants who started repayments in May 2021, but June 2021 was when repayments started in earnest as it’s month 13 for the bulk of early borrowers.

Plenty of businesses find themselves in a position to repay the loans as originally scheduled (for the first year, there were no capital repayments and the government paid the interest; the capital and interest then get repaid over five years).  Many have actually already repaid their loans – it was quite common to take the loan just in case it was needed, with the intention to repay it before the borrower had to start paying the interest, and we’ve seen plenty of businesses doing that.

But there are some businesses that are still struggling.  Some of them would have been struggling anyway, but many are obviously struggling specifically because of the ongoing impact of the pandemic.  The good thing is that for those businesses there are some new, more generous repayment options, collectively known as Pay As You Grow (clever in that it rhymes with Pay As You Go, but stupid in that one might be confused by what PAYG refers to in some contexts).  The bad thing is that the Bounce Back Loan regime, which was lovely and simple, has been transformed into being rather messy.

Under PAYG you’ve three options:

1. You can extend the repayment term.  Rather than the initial six year loan, with repayments over years two to six, you can extend it to 10 years instead, with repayments over years two to ten.
2. You can take up to three six-month interest-only periods, at any point you choose.  You’ll still owe the capital amount, but you can have a breather from repaying it.  Each time you do that, you can also ask to extend the loan term by six months, UNLESS you’ve already extended it to 10 years anyway.
3. You can have one six-month capital AND interest holiday where you make no payments at all (you can’t split this holiday – or the previous three – into a greater number of smaller breaks.  It’s six months or nothing).  Again, when you do this you can ask to extend the loan term by six months if you’ve not already extended it to 10 years.

All three of those options are going to increase the cost of the loan to you in the end, because interest is always going to be based on how much you owe to the bank at any given moment.  The longer you owe money to them for, the more it’ll cost you.  So, although taking a loan “just in case” was more or less a no-brainer for many businesses, PAYG isn’t.

You don’t have to choose one of those options; you can mix and match them all and do the lot if you like.  The actual mechanism for applying is going to vary from lender to lender, but it’s likely you’ll just do it via their online banking platform.  You don’t need to get approved or credit checked – it’s your right to just tell the bank what you want.  Borrowers are assured that taking advantage of PAYG will not have an impact in itself on their credit rating – though of course it you’re having to take a payment holiday or extension because of some kind of financial distress, it’s likely that whatever is leading to that is going to be having some impact on that rating anyway.

There’s a good amount of kicking cans down roads in all this.  The initial BBL scheme meant that there was absolutely no incentive for banks to credit check applicants in any meaningful way at all (when the government has guaranteed the whole thing, why on earth would a bank spend even ten seconds contemplating the borrower’s ability to repay?).  That means that the borrowers (if we put the fraudsters to one side) are a mix of businesses with real prospects where making a loan to them is genuinely economically productive, and a bunch of hopeless cases where they didn’t have a viable proposition in the first place.  But perhaps these options will move a few businesses from the second camp to the first, and also help some businesses already in the first camp to recover and grow in a more secure way along a slightly less perilous path.

www.fizzhq.com

What’s the super-deduction?

If you’re in business, you’ll be used to the idea that generally you get to save tax on the whole cost of new equipment (except cars) in the year you buy it – the “Annual Investment Allowance”, which gives you a 100% deduction from profits for the cost of a laptop, van, loom or whatever. As of 1st April, companies will be able to claim a 130% deduction instead (aka the super-deduction).  

If you think about it, the government had to do it, because they've announced that the corporation tax rate will rise from 19% to 25% in April 2023.  Knowing that, companies would have delayed big investments in equipment until then, trying not to buy anything significant for a couple of years.  That’s not conducive to economic recovery.   How do you eliminate that factor from the decision-making process?  You give a 130% deduction for the next couple of years.  19% x 130% comes to 24.75%, meaning that a company that’s going to be paying tax on its profits at the new 25% rate will save more or less the same amount of corporation tax if they make the purchase between 1 April 2021 and 31 March 2023 as they will if they wait until April 2023.  The super-deduction just removes any tax incentive to delay investments.

As you’d expect, though, there are some wrinkles and things to be aware of!  Here are a few.

• The super-deduction only applies to companies, not to sole traders, partnerships or LLPs. That’s completely reasonable – that known approaching increase in the tax rate doesn’t apply to them, it only applies to limited companies.  Other businesses continue to save tax at the marginal rate of the sole trader or partner – most likely 29% or 42%.  There’s no reason for them to delay purchases, so no special incentive is needed.
• Not all companies will pay tax at a pure rate of 25% from 2023.  In fact, most won't - it's only companies with profits over £250,000 that will pay at that rate.  Companies with profits under £50,000 will still pay at 19%, so for them the super-deduction actually is a genuine boost for a couple of years.  Companies with profits between £50,000 and £250,000 will pay tax at 19% on the first £50,000 and then 26.5% on the next £200,000, so they'd still technically benefit by waiting to invest, but not by much; saving at 26.5% rather than 24.75% isn't going to make much of a difference unless the investment involved is pretty big.
• The super-deduction doesn’t apply to cars. This one is a bit more surprising.  The government is using the tax system to strongly incentivise companies to provide electric vehicles to employees.  There’s now a competing disincentive to delay purchase and provision of them until 2023.  Perhaps the government thinks that the incentives are so big that they outweigh that disincentive, or that people need to drive around and can’t just sit at home until 2023 so cars are going to be bought anyway.
• It also doesn’t apply to some other, more niche, classes of assets, like integral features in buildings, so any company looking at big levels of investment in anything other than mainstream plant and machinery should be careful (or at least be open to the possibility that it won’t all get the super-deduction).
• It doesn’t apply if you’re going to be leasing the asset out to customers (although, for companies letting out commercial property, a subsequent change of heart by HMRC means that the super-deduction is now available on certain qualifying assets of those businesses, after they were excluded in the first draft of the legislation).
• Although you save tax on 130% of the cost on the way in, if you sell the thing again before the tax rate goes up, you have to pay tax at 130% of the proceeds on the way out too. So you can’t claim 130% tax relief on something you buy and then sell it on in short order to try and craftily create a tax windfall.
• You can’t claim the super-deduction on second-hand goods – there could be quite a lot of second-hand equipment around at the moment as businesses have failed or shrunk, but those things will only save tax at the normal rate.

So, great headlines, but when you scratch the surface things aren’t quite as generous or simple as they seem!  It’s really an incentive to behave in exactly the same way as you would have done if you didn’t know corporation tax is due to rise in 2023.

www.fizzhq.com

NFTs and Tax

One of the hottest financial topics at the moment is NFTs - Non Fungible Tokens.  Leaving aside questions of the degree to which they could be considered a bubble or environmentally wasteful, we’re starting to get questions about how trade in them might be taxed.

The good news is, there’s not really anything special about them in that regard.  If you’re in business making and selling NFTs, then that’s a trade and you’re going to pay tax on the profits.  You’ll have identical considerations around structure and tax planning to any other business (one interesting one might be - if your main business is VAT registered, might you want to keep this sideline out of the VAT net by keeping it separate?).

One thing that might be a bit different is that you’re probably much more likely than most businesses to get paid in cryptocurrency.  That’s fine - as with any other business, that’s just taxed the same as if you’d been paid in real money.  If you get paid one ETH (say) today, that’s about £1,200.  That’s your income, whatever you're going to do with the ETH subsequently - you can't defer the tax by keeping the revenue in crypto. 

If you convert the ETH into real money at that point, we’re done.  If you don’t, and hang on to it, then you need to retain an awareness of the potential Capital Gains Tax consequences of buying and selling crypto.  That’s taxed in more or less the same way as buying and selling shares.  We wrote more about the traps people might not realise they’re falling into here.

www.fizzhq.com

 

 

IR35 isn't relevant to sole traders!

Next month, an important aspect of IR35 changes.  For big companies engaging with a contractor via the contractor's own limited company, the responsibility and risk of deciding whether it's an employment-like relationship and employment taxes should therefore be paid falls upon the customer, not on the contractor.  That's it.  That's the change.

 

For a sole trader, IR35 is objectively of no relevance of any sort, as it relates specifically to that situation where someone is working and billing via an entity that sits between them and the end user.  But what's becoming very clear is that agents, recruiters and employers are often attempting to deal with the IR35 change without having a basic understanding of what IR35 even is!

 

In particular, we're seeing multiple instances of sole trader freelancers being told that they need to go on PAYE or via an umbrella company (also PAYE) because of IR35.  It's often going to be the case that those people should indeed go on to PAYE.  It hasn't got anything to do with IR35, though.  It's just basic employment tax rules that have been in place for decades.  People were always at risk by engaging sole trader permalancers - an HMRC PAYE inspection would give them a massive and expensive problem if it emerged that they were failing to put people who were really employees on PAYE.  It's for the best that they're addressing that issue - but they're doing the right thing for the wrong reason!

 

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More furlough winners and losers

Many people were wondering what basis would be used for working out the appropriate furlough claims for March and April 2021 for staff on variable hours.  Up until that point, part of the process has involved looking back to the same month a year earlier, and using the higher of that month’s pay or average 2019-20 monthly pay.  But that process would start to fall apart from March, because if you looked back a year you’d be looking at a month that could itself already involve furlough pay, and then you may be starting to work with 80% of something that’s already been reduced to 80%, which is hardly fair.

The new rules have now been published, and they dictate that for those months, you’ll look back two years, to March 2019 and April 2019, for the single-month element of the "higher of" comparison.  That’s going to be great news for some people.  Somewhere out there, there will be someone on furlough who was paid on average £500 a month in 2019-20, but had a really big April 2019 when they were paid £3,000.  That means they’ll have had a furlough bonanza in April 2020, when the system looked back to April 2019 and based their pay on that big month.  And now they’re going to have another big furlough month in April 2021, getting a second chunk based on that same April 2019 pay.

On the other hand, this “look back” system produces losers too, even before the new March/April wrinkle.  Anyone with fixed hours who has increased those hours in 2020-21 and is now furloughed is going to be paid based on a similar look back to 2019-20.  Imagine someone was working three days a week back in January 2020, but within the last 12 months they’ve gone up to four days.  Now their employer has furloughed them for one of those four days a week.  They’re going to get no pay for that day, unfortunately.  The system will look at their usual hours back in January 2020, then look at their actual hours worked in January 2021.  There’s no difference, and that means there’s no claim.

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IR35 isn’t being introduced in April

IR35 was introduced in 2000, so it's going to be 21 this year.  In a nutshell, IR35 says that, insofar as your limited company’s revenue comes from you really being a pseudo-employee of an end-client, you can’t use the tax and National Insurance efficiencies of dividends – the company’s got to pay more or less all of that revenue out to you under PAYE.

Simple in theory, a complete failure in practice.  A company’s director had to make the call on whether IR35 applied and whether far more tax and NI should be paid, so there was a big financial incentive to argue they were outside it, and HMRC lacked the resources to police the rules in any meaningful way at all.  And, in any case, the question of what represents an employee-esque relationship is often impossible to answer with certainty.  In the modern world, countless people sit in that grey area somewhere between employment and self-employment.

So, IR35 was to all intents and purposes a failure.  In 2017, the government changed it a little.  If your customer was a public body – an NHS Trust, for example – then the decision was taken out of your hands, and the public body would decide if IR35 applied.  If they decided it did, they’d effectively take your company’s invoice, work out and deduct full employment taxes, and pay whatever remained, to put you more or less on a par with a PAYE employee.  This was effective in one sense – a lot of public bodies did apply the rules in that way – but had the unintended consequence that many of the better contractors just decided to move into the private sector and work there instead.

As a result, the government had a second idea.  From April 2020, those same rules would apply to big private sector companies too – they’d have to make the IR35 call themselves, at their own risk, and if they paid pseudo-employees via a limited company gross then the risk of employment taxes not being paid would be their own risk, not that of the contractor.  This was actually quite effective, and a bunch of big companies stopped using contractors entirely, either putting the workers on to PAYE or just outsourcing that PAYE processing to an umbrella company (technically they could go down that previously described route of deducting employment taxes from your company’s invoice, but there’s no real point, PAYE is an easier way of achieving the same result).

Then COVID happened, and the April 2020 introduction was postponed by a year.  The big companies who’d played ball and got ready for the new world found they could have got away with another 12 months of using contractors.  The big companies who buried their heads in the sand did get away with it.

But the change is still due to come in this April instead, so hopefully those latter companies have removed their heads from the sand and are getting ready to engage with it.  There’s a chance it could be postponed again, of course (the government have form over the last couple of years of very short-notice postponements of changes that businesses have spent a lot of time and money preparing for, even prior to COVID), but it seems unlikely, and it’s clear that it’s being talked about more this time round.  However, what that means is that you do hear a lot of things being said about it that aren’t accurate at all, such as:

• “IR35 is being introduced in April”.  No it’s not.  IR35 has been around for more than two decades.  All that’s happening is the responsibility of non-compliance is being shifted from the contractor’s company to its customer, if the customer is big.
• “You can’t take on a contract if it’s under IR35”.  IR35 has never had anything to say about whether a contractor’s company can accept an engagement or not.  It’s legislation about how a contractor must get paid by their own company.
• Crucially – “It’s more risky to be a contractor from April”.  There might be fewer contracts around, that’s true, with more of those gigs being offered on a PAYE basis instead.  But if you’re a contractor working for a big company, and they’re content to continue paying your company’s invoices in full, there’s *less* risk than before, as the customer now bears the burden of non-compliance.  There may well be some ultra-cautious contractors who decide to declare under IR35 anyway, even if their customer is happy to pay gross, but HMRC are going to be going after the end user in the first instance, not the contractor.  Anyone in that situation will clearly be at less risk than they were before, not more.
• End users of contractors telling contractors “there are some changes coming in April, you should look into them.”  Er, no, *you* should look into them.  This is a transfer of risk *from* contractors *to* end users.  The end users are the ones who need to understand what’s happening.

What is certainly true is that some contractors are going to find themselves taking PAYE jobs instead.  And what’s also true is that many of those people will find themselves earning less money than they used to.  Some of them will be able to ask for, and get, a bigger daily rate in order to make up for it, if they have particular bargaining power for some reason, but many won’t, as their fundamental value to their client/employer hasn’t changed.

There are two ways of looking at it, really.  Some contractors will be phlegmatic about it, considering they’ve done well for a while, and that now finding themselves with a tax burden on a par with that of an employee isn’t the end of the world.  And some contractors will not be phlegmatic about it at all, especially if their life involves overheads more or less equal to their present net income.  But it is what it is, and even if the change is postponed for a second time, it will come.  The tax system isn’t fit for 2021 in many respects, and the vast number of contractors using limited companies simply wasn’t contemplated when the fundamental levers of corporation tax, income tax and National Insurance were first created. 

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