Andrew Brook
23 Nov 2022
Surprise NI cut but no change to Income Tax Bands or Rates
In what was expected to be the last Autumn Statement before the General Election there was no announcement on Inheritance Tax but a surprise reduction in National Insurance, with differing implementation dates.
The Key points were as follows:
Cuts to Employee NI (PAYE) to take effect from 6th January 2024 and self-employed/partner NICs from 6th April 2024.
100% Fist Year Allowance ('full expensing') for companies made permanent (original announcement that the scheme was to cease on 31/3/26 has been cancelled)
extension of 'Cash Basis' for calculating taxable profits for sole traders and partnerships extended.
Simplifications to the forthcoming MTD for sole traders from April 2026
State Pension to rise by 8.5% from April 2024
No changes to Income Tax, Inheritance Tax or Stamp Duty Land Tax
NI
From 6th January 2024 Employee's National Insurance contributions will be cut from 12% to 10% for earnings between the Primary Threshold (£242/week) and the Upper Earnings Limit (£967/week). The 2% rate for employees above the Upper Earnings Limit and the Employer's 13.8% rate remains as is.
Self-Employed and Partners NIC will reduce from 9% to 8% from 6th April 2024. While the weekly compulsory flat rate of £3.45 for Class 2 contributions will be abolished from 6th April 2024, individuals with profits of less than £6,725 a year can continue to pay voluntary contributions to maintain their state pension contribution record.
FYA
To incentivise Capital Investment, the temporary full expensing relief (100%) announced in the Spring 23 Budget will be made permanent. Consultations will be held on further expansion of the 100% relief into other areas.
Cash Basis
Not to be confused with the Cash VAT scheme, it was the case that all Sole Traders and partnerships were presumed to account under the Accruals/Invoice Basis and had to elect to report under a Cash Basis. The simplified Cash Basis for calculating taxable profits will become the default method and the turnover, interest and loss relief restrictions will be removed.
MTD Reform
Following the HMRC's 'Small Business Review' it was announced that Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) would not be extended to landlords and sole traders with income under £30,000 at this time. However, the Government will keep this decision under review, and there remains the possibility that these groups will be brought into MTD for ITSA at some point in the future.
It was also announced that foster carers and those who are ineligible for an NI Number would be exempt too.
The previously announced requirement for taxpayers to file a Final Declaration together with a separate trading statement for each separate business activity has been simplified by the requirement for a Final Declaration being removed.
Joint property owners will be able to elect to report income only (and not expenses) in quarterly updates and there will be a simplification of record-keeping requirements to assist them.
State Pension
The Chancellor maintained the Triple Lock by announcing an increase in the State Pension by 8.5% from 6th April 2024. This means that the full State Pension will rise by around £900 to £11,502.40 in the 2024/25 tax year (£221.20 a week). For tax year 2023/24, it’s currently £10,600 a year or £203.85 a week.