The Chancellor, Jeremy Hunt, delivered the Autumn Statement on 22 November 2023 against a backdrop of a cost-of-living crisis and a looming general election. To help you understand it, we have produced a summary of the main points.
There were rumours of tax cuts in the days leading up to the Autumn Statement after the October inflation rate was published. Among those were potential cuts to Corporation Tax, Inheritance Tax and National Insurance. The first two didn’t materialise.
In fact, the ‘tax cuts’ in the Autumn Statement 2023 focussed on National Insurance, which is still a tax in my book. With inflation reducing, the Chancellor make some welcome tax cuts.
Employees - 2% cut to the main rate of national insurance
The primary rate of Class 1 National Insurance, paid by employees, is cut from 12% to 10%. Unusually, rather than waiting until the start of the new tax year on 6 April 2024, the change will be implemented in respect of paydays on or after 6 January 2024. The rate is currently charged at 12% on earnings between £12,570 and £50,270 and 2% on wages and salary above that. Whilst the main rate of National Insurance will fall to 10%, the rate on pay over £50,270 will remain at 2%.
The Chancellor said that the change will help 27 million employed working people and mean someone on the average salary of £35,400 will save over £450 a year. The maximum annual saving is £754 for anyone earning over £50,270
There is no change to the rate of secondary Class 1 National Insurance, paid by employers.
Self-employed – 1% cut to the main rate of national insurance
From 6 April 2024, the Class 2 National Insurance flat rate charge of £3.45 per week for self-employed people with profits more than £12,570 is abolished.
From the same date of 6 April 2024, the rate of Class 4 National Insurance is reduced, from 9% to 8%, on all profits between £12,570 and £50,270.
Taken together, with the abolition of Class 2 National Insurance, these reforms will save around two million self-employed people, on the average self-employed person’s profit of £28,200, an average of £350 a year from April 2024.
It will still be possible to pay Class 2 National Insurance on a voluntarily basis e.g. for those with profits below the small profits threshold, of £6,725, who wish to accumulate contributory benefits.
The Chancellor stated that Class 2 National Insurance is being abolished, though the situation is not quiet that, as the self-employed with profits of less than £6,725 may continue to choose to pay voluntary contributions, mainly for state pension reasons.
The self-employed, with profits between £6,725 and £12,570, will continue to receive access to contributory benefits including a qualifying year towards their state pension, through a National Insurance credit, without having to pay any Class 2 National Insurance contributions as they currently do.
Voluntary National Insurance
Individuals will still be able to pay voluntary Class 3 National Insurance, if applicable, in order to fill gaps in their National Insurance record and thereby enhance their state pension. The weekly Class 3 National Insurance rate remains at £17.45 for 2023-24.
The State Pension ‘triple lock’ will continue to be honoured. This means that the State Pension increases each year by the higher of:
• Inflation, as measured by the Consumer Prices Index in September
• The average increase in wages across the UK from May to July, or
Because of wage growth last year of 8.5%, the higher of the three amounts, people on the full new State Pension will receive an increase of than £900 a year in their pension in 2024/25 i.e. £221.20 per week or £11,502 pa.
Full expensing capital allowance
Jeremy Hunt also made permanent a tax break for businesses that allows them to save corporation tax in the year of purchasing new plant and equipment, rather than spreading the tax cost over a number of years in the future through writing down allowances.
Making Tax Digital
In December 2022, it was announced that the introduction of MTD ITSA for the self-employed and landlords would be put back by two year to 6 April 2026. Those with aggregate annual profits over £50,000 pa will join the scheme from 6 April 2026, and those with annual profits between £30,000 and £50,000 a year later on 6 April 2027.
The thresholds of £30,000 and £50,000 apply to aggregate gross income from self-employment and property income and not just to each type of income.
HMRC has confirmed that MTD ITSA (Making Tax Digital for Income Tax Self Assessment) will not be introduced for the self-employed with profits under £30,000, at least for the time being. This decision will be kept ‘under review.’
MTD for Income Tax Self Assessment currently only applies to self-employed people, and partnerships, and not to those ‘self-employed’ through limited company, who of course pay Corporation Tax and not Income Tax.
Taxpayers will no longer have to file an End of Period Statement (EOPS) for each self employment or group of properties.
Under the original MTD ITSA rules of year-end reporting, a person would have to make an EOPS for each self-employed business and for any let properties, as well as a Final Declaration. The latter would be akin to the current Self Assessment final declaration confirming the completeness and accuracy of all sources of income, allowances and reliefs etc in order to calculate the final tax due for the tax year.
Quarter end submissions, for each self-employed business and for any let properties, will now only need to be made on a cumulative basis. This allows easier amendments, with individuals able to correct any errors in their next quarterly submission, rather than potentially having to resubmit past quarterly submission.
joint landlords will be able to opt out of quarterly submission and keep simpler records for jointly owned property. This should simplify their record keeping and reporting, and reduce the need for joint property owners to share records multiple times a year.
The National Living Wage will increase by 9.8%, from £10.42 to £11.44 per hour, for 23-year-olds and over, from 6 April 2024. The NLW will be expanded to include 21 and 22 year olds for the first time.
The 75% business rate discount for retail, hospitality and leisure has been extended for another year until 2025.