IT Contractors, 22% and Mr Fusion...

So... Gordon Brown has finished his triumphant budget speech, ending with a cut in the standard rate of income tax from 22% to 20% from next year - a tactic normally reserved for budgets before a general election, but welcome none-the-less.

However for an IT Contractor following the industry standard practice of working through their own ltd company, the news is less Rosy.

It has been well known that the government has been planning to crack down on various methods of legal tax avoidance - but today Brown announced an increase of 2% in the rate of Small Business Corporation tax (tax on profits of £50 to £300k per annum) from 20% to 22% by 2009. This measure has been specifically put in place to target individuals working through their own limited companies and to bring them more in line with those paid via PAYE but will affect ALL small businesses.

We pay IT contractors in a variety of ways depending on their preference with methods including full PAYE and the more standard method, in the IT world, of paying on receipt of their Ltd company invoices.

While we cannot hide from tax increases it is worth bearing in mind the still legal and effective schemes to help contractors claim back expenses, boosting their tax-free income. One company I work with to provide this service is Cash Simply, who have a product called "Gain Advantage" - I always offer this as an option to all new contractors.

Another possible way forward to this is an Umbrella company that seems to tick all the boxes for compliance called "Work 2 Live." I met Laura Beardsley at the last Recruiters Network event and remained sober enough to understand her business proposition :-)

For more info on Gain Advantage get in touch with me anytime. To check out what Laura's company can do to help - try www.work2live.co.uk

PS: - Gordon's stuck the rate of road tax up too - do any of you know how to run a petrol-engined car on recycled garden waste or will I have to wait for the "Mr. Fusion Home Energy Reactor" from Back to the Future?

Cheers
G