How to become an IT Contractor - Becoming an IT Contractor

The Chancellor has delivered his Pre-Budget Report, which contained a number of tax changes which won't come into play until after the election. Significantly for limited company contractors, the 1% corporation tax hike planned for April 2010 has been delayed by a year.

No specific measures appear to have been implemented which will affect the contracting industry in particular, such as any mention of IR35 or income shifting, for example.

Key points from the PBR

Here are some of the main points from today's speech:

- The UK economy is expected to contract by 4.75% in 2009, having fallen by almost 6% from peak to trough.

- Government borrowing is set to rise to an impressive £178bn this year.

- The Small Companies' Corporation Tax rate remains at 21% for 2010/11, with the planned rise to 22% delayed until the following tax year.

- The standard VAT rate returns to 17.5% at the start of 2010.

- Flat Rate VAT rates have been updated for 2010 (see here). From 1st January 2010, the "Computer and IT consultancy or data processing" percentage reverts from 11.5% back to 13%.

- Income tax rates and bands are frozen for 2010/11, aside from the pre-announced 50% tax rate on incomes over £150,000

- NICs remain unchanged for 2010/11 aside from a £2 rise in the lower earnings limit for Primary Class 1 NICs, but employer and employee NIC rates will be hiked by an additional 0.5% from April 2011.

- The inheritance tax allowance will be frozen at £325,000 for individuals and at £650,000 for married couples and civil partners in 2010/11.

- The higher rate income tax threshold will be frozen at £43,000 from April 2012

- Restriction of pensions tax relief from April 2011 will apply to those with gross incomes of £150,000 and over, where gross income incorporates all pension contributions, including those funded by an employer (subject to an income floor).

- Empty property relief has been extended for small companies.

- A new 10% corporation tax has been introduced on income from UK patents.

- The Enterprise Finance Guarantee Scheme (EFG) has been extended for another year.

- The Business Payment Support Service which enables businesses to spread the payment of their tax liabilities will be continued.

You can read the full speech on the HM Treasury site.