Autumn Statement Reaction

The Chancellor, Jeremy Hunt, has set forth the Autumn Statement today, we break down the major changes to the tax rates and how this will impact you.

Self Employed

Firstly, the abolition of Class 2 National Insurance. Class 2 national insurance contributions started in 2015 and have been charged as a flat rate for self employed earners. The rate for 2023/24 was £3.45 per week, if your profits exceeded £12,570 for the year. 

If your earnings for a year were below £12,570, you could make voluntary payments of Class 2 NIC, to count as a contribution for the year. This was then taken into account when calculating your qualifying years for state pension. We have not got any details yet, to see if there will be a scheme to replace this.

The other major announcement was a cutting of the rate of Class 4 national insurance. Unlike Class 2, Class 4 national insurance contributions are currently charged at 9% on profits over £12,570. It was announced that this was being reduced to 8%.

 These changes to national insurance will come into effect from April 2024.

Limited Companies

It was also announced that full expensing for business will be made permanent, meaning that companies can claim 100% tax relief on qualifying plant and machinery in the year that they were purchased.

The scheme was due to come to an end at 31 March 2026, but this has now been made permanent.

The scheme is beneficial if as a company you are making investments of £1 million or more into qualifying expenditure, as these were already covered by the Annual Investment Allowance.

Employers

The Class 1 National Insurance rate for employees is set to drop from 12% to 10%. This rate is charged on employee’s earnings between £12,570 and £50,270.

This rate change comes into effect on 06 January 2024. If you complete your own payroll, this is something that you will need to be aware of.

It was also announced that the National Living Wage would increase by 9.8% to £11.44 per hour from April 2024.