There are 2 measures he has introduced to tackle this:
1. The main rate of Class 4 NIC which applies to unincorporated businesses (sole traders) will increase from 9% to 10% in April 2018 and to 11% from April 2019.
2. The dividend allowance will be reduced from £5,000 per shareholder to £2,000 per shareholder from April 2018.
As a result, many sole traders, partnerships and limited company contractors will face a reduction in their income from April 2018.
Other pre-announced changes will take effect from April 2017.
From 6 April 2017, the public sector bodies will be responsible for determining whether the contractor is caught by IR35. If they believe that the contract is caught by IR35, PAYE tax will be withheld from the payments made to the company.
Although previously it was announced that no allowance would be given for expenses incurred by the contractor HMRC have now said that it will be optional for the agency or the public sector body to take account of the worker’s expenses when calculating the tax due.
There are no changes to the current regime for contractors working in the private sector.
Businesses that have limited costs will therefore have to consider whether to stop using the flat rate VAT scheme or whether to deregister for VAT altogether.