Chancellor Jeremy Hunt announced a number of tax and National Insurance changes in his Autumn Statement speech. We take a look at the key announcements as well as some of the other tax changes that have been published.
For a full overview of the changes, see HMRC’s Policy Paper here.
National Insurance Contributions
The biggest personal finance change announced was to National Insurance Contributions (NICs). Changes were made to NICs for both self-employed and employed workers.
For employees, the main rate of primary Class 1 NICs is being reduced from 12% to 10% from 6 January 2024. For the self-employed the main rate of Class 4 NICs will be reduced from 9% to 8% from 6 April 2024.
From 6 April 2024, self-employed people with profits above £12,570 will no longer be required to pay Class 2 NIC (currently which is currently £3.45 a week), but will continue to receive access to contributory benefits including the state pension. Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits including the state pension through a National Insurance credit without paying National Insurance contributions as they do currently. Those with profits under £6,725 who choose to pay Class 2 voluntarily to get access to contributory benefits including the state pension will continue to be able to do so.
Income Tax
There will be an extension to the existing sunset clauses for the EIS and VCT schemes from 6 April 2025 to 6 April 2035, meaning these tax efficient investments will be available for a further 10 years.
The cash basis (a simplified way of calculating taxable profits for income tax purposes) for the self-employed and partnerships will be expanded. The changes that will be made are to set the cash basis as the default method for small businesses, and remove the turnover, interest, and loss relief restrictions that currently apply to the cash basis. The changes will take effect from 6 April 2024.
The government will introduce legislation to complete the work to remove the Pensions Lifetime Allowance. The measure will clarify the taxation of lump sums and lump sum death benefits, and the application of protections. It will also clarify the tax treatment for overseas pensions, transitional arrangements, and reporting requirements. The measure will take effect from 6 April 2024.
Corporation Tax
Full Expensing for Capital Allowances will be made permanent. Full expensing allows companies incurring qualifying expenditure on the provision of new plant and machinery on or after 1 April 2023 (and previously before 1 April 2026, but now indefinitely) to claim a 100% first-year allowance for main rate expenditure or a 50% first-year allowance for special rate expenditure.
For Research & Development (R&D), the government will merge the current small or medium enterprise (SME) and R&D Expenditure Credit (RDEC) schemes for accounting periods beginning on or after 1 April 2024. This will simplify and improve the system. The rate offered under the merged scheme will be implemented at the current RDEC rate of 20%. The notional tax rate applied to loss-makers in the merged scheme will be the small profit rate of 19%, rather than the 25% main rate currently set in the RDEC.
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Please note that the above is for general information only and does not constitute financial or tax advice. You should not rely on this information to make or refrain from making any decisions. You should always obtain independent professional advice in respect of your own situation.
