
IN A LARGELY uninspiring speech and, amidst declining inflation rates, the Chancellor’s Autumn Statement delivered some fairly unspectacular tax cuts.
In today’s Shipleys Tax note we give you a snapshot of what you need to know as an employer, self-employed or business.
National Insurance Takes Centre Stage
Following much vaunted speculation post-October’s inflation report, expectations were high for potential reductions in corporation tax, inheritance tax, and National Insurance (NI). The final decision primarily impacted NI, affecting both employees and self-employed individuals. However, the effective dates for these changes vary.
Employee NI Rate Cut from January 2024
Effective from 6 January 2024, the Primary Class 1 main NI rate will decrease from 12% to 10%. This alteration, reminiscent of the mid-year modifications in 2022/23, necessitates payroll software updates. It’s crucial for businesses to ensure these updates are implemented before processing January’s payroll. Note: The rate for earnings above the Upper Threshold remains at 2%.
Significant Changes for Self-Employed NI Contributions from April 2024
Starting 6 April 2024, Class 2 NI contributions, mandatory for the self-employed, will be abolished. Self-employed individuals with profits between £6,725 and £12,570 will maintain access to contributory benefits like the state pension through NI credits without paying contributions. Voluntary Class 2 payments remain an option.
Additionally, the main Class 4 NI rate will be reduced from 9% to 8%.
Extended NI Incentive for Hiring Veterans
The beneficial NI incentive for recruiting veterans is now extended until 2025.
Expansion of Cash Basis Accounting for Self-Employed Businesses
The Autumn Statement also brought some good news for self-employed businesses using cash basis accounting. The turnover limit for this accounting method has been removed. Previously, businesses had to switch to the accruals basis after exceeding £300,000 turnover
Business tax
- Capital allowances – permanent full expensing – Full expensing is now a permanent tax break for companies. The Spring Budget 2023 introduced two new temporary first-year allowances. For expenditure on plant or machinery incurred on or after 1 April 2023 but before 1 April 2026, companies can claim a 100% first-year allowance for main rate expenditure – known as “full expensing” – and a 50% first-year allowance for special rate expenditure. Today’s announcement makes full expensing and the 50% first-year allowance permanent by removing the expiry date of March 2026.
- The two R&D reliefs (RDEC and the SME scheme) to merge from 1 April 2024 – A range of measures on tax reliefs have been announced including enhanced support for Research and Development (R&D) intensive small and medium-sized enterprises, an extension to the ‘sunset date’ for freeport tax reliefs and administrative changes to the creative industry tax reliefs.
- The EIS and VCT schemes are extended for another decade.
- The tax reliefs for Investment Zones and Freeports are extended to ten years.
More to follow.
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