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  • Writer's pictureUmbrella Search

How does the 2024 Spring Budget impact contractors?

Updated: Mar 20

Every contractor will want to know how the measures announced in the Spring 2024 budget by Chancellor of the Exchequer Jeremy Hunt will impact them.

Chancellor Hunt announced a range of measures including a cut to National Insurance, a change to the VAT threshold, changes to child benefits, property investments and more. But what exactly will impact contractors directly?

In this guide, Umbrella Search outlines everything contractors need to know about the Spring 2024 budget and what impact this will have on you.

Changes to National Insurance

One of the main headlines of the Spring 2024 budget was the change to National Insurance. Hunt announced that he would be cutting the main rate of employee National Insurance by 2p, from 10% to 8%. This is set to come into effect from the 6th April 2024.

The government will also be cutting 2p from the main rate of self-employed National Insurance, meaning a cut for self employed workers with rates going from 8% to 6%.

In practice, this means that an employee earning £35,000 will save on average £450 per year.

So what does this mean for contractors?

The great news is that contractors working through an umbrella company are set to save due to the cut to National Insurance. This is owing to the fact that umbrella companies employ the contractor and will therefore benefit from the reduction in employee's National Insurance.

It is worth noting, however, that if you are a contractor that operates through your own limited company, the National Insurance rates have not changed, meaning you will not benefit from these announcements.

If you are a contractor operating as a sole trader, you will benefit from cuts to National Insurance, paying the rate of 6%.

Changes to VAT thresholds

Hunt has announced plans to increase the VAT threshold from £85,000 to £90,000. This means that any business turning over more than £90,000 will have to pay VAT on their turnover, however under this amount no VAT will be due.

Although this does not impact umbrella company contractors who operate as employees under their chosen umbrella companies, it may have an impact on limited company contractors.

Limited company contractors who turn over more than the threshold amount must pay VAT. Although it is good news for these contractors that the threshold has been raised slightly, paying VAT is an additional cost to those contractors that umbrella company contractors do not face.

What is an umbrella company?

Reforms to child benefits

Within the Budget, Hunt announced much anticipated reforms to child benefits. Although this will not impact all contractors, it will impact many of those with children.

Hunt has announced that the High Income Child Benefit Charge threshold would increase to £60,000 from April 2024, up from £50,000.

Previously, the High Income Child Benefit rules have been widely criticised for penalising families with single parents or one high earner. Currently, a household where two parents both earn £50,000, with a total household income of £100,000 can claim the full amount of child benefits. However if just parent is a low earner and one parent earns just over £50,000, child benefits are reduced and cut altogether at £60,000.

Hunt has announced changes to this however, and has declared that from April 2026, child benefits will be based on total household income.

This means potential savings for thousands of contractors across the UK.

Property investments

Hunt also introduced a number of measures that will impact property investments.

The Chancellor announced that he would scrap tax breaks making it more profitable for second home owners to rent out their properties as holiday rentals rather than to long-term tenants.

Hunt also announced that the higher rate of Capital Gains Tax on residential property would be reduced from 28% to 24%.

Furthermore, Hunt announced that Stamp duty relief on the purchase of multiple dwellings will be abolished.

Such measures will have an impact on any contractors with property investments.

Dividend tax allowance

Hunt had previously announced in the autumn 2023 budget that the current tax-free dividend allowance of £1,000 per year will be reduced to £500 from April 2024.

This will impact contractors that operate through a limited company that pay themselves an income in a mix of a low salary topped up by dividends which attract a lower tax threshold than income tax. This will push an extra £500 into taxable dividend income, increasing your dividend tax liability by £44 per year.


Contractors will once again be disappointed to learn that Chancellor Hunt did not mention IR35 within his Spring budget. Contractors have been eager to see reforms to IR35, with thousands being caught out by the legislation and subject to lengthy, expensive and stressful IR35 rules and investigations.

Once again, although this doesn't impact umbrella company contractors who are automatically exempt from IR35 because they are employees of their chosen umbrella companies, the absence of IR35 will matter to limited company contractors who are impacted by the legislation.

Take the next steps with Umbrella Search

In general, the Spring Budget 2024 was good news for employees in the UK, including umbrella company contractors who are employed by their chosen provider. With the announcement of a cut to National Insurance, these contractors can expect to save within the next tax year, with a reduced NI liability.

Unfortunately, however, limited company contractors won't benefit from these changes.

Overall, there are many benefits to being employed within the next tax year, such as the cuts to National Insurance, meaning many contractors may be considering joining an umbrella company.

If you'd like to find out more about taking the next step to using an umbrella company, Umbrella Search is here to help. Our team of professionals will help you find an umbrella company that's just right for you, so you can focus on your contracting career whilst being supported by an umbrella provider with your best interest at heart.

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