If you’re a contractor or freelancer, you might have tuned into the Autumn Statement expecting some big shake-ups. However, Chancellor Jeremy Hunt’s update turned out to be relatively low-key for our sector. But don’t let that fool you – there are still some noteworthy changes worth your attention so let’s dive into the details.
Lightening the NIC Load
For self-employed (sole traders), the Class 4 NIC rate is set to go down from 9% to 8% on profits between £12,570 and £50,270, effective from April 2024. Plus, the flat rate Class 2 NIC, which is currently £3.45 per week, will no longer apply to those earning above £12,570. And yes, you’ll still have access to essential contributory benefits like the state pension.
For those earning less than £6,725, the small profits threshold remains steady, ensuring continued access to National Insurance credits without the need to pay NIC.
Employees Get a Break Too
If you’re on a payroll, there’s a bit of relief coming your way as well. The main rate of employee NIC will drop to 10% (currently 12%) on earnings between £12,570 and £50,270 from January 2024.
IR35: Easing the Double Taxation Woes
The Chancellor has tackled a significant IR35 issue – ‘double-taxation’ in cases of incorrect status determination. With this fix, HMRC will now account for the taxes you’ve already paid, reducing financial risks and complexities for contractors and clients alike.
Full Expensing: A Permanent Feature
The full expensing policy, allowing deductions on investments in equipment from profits (therefore reducing Corporation Tax), is now here to stay. This includes a 50% first-year allowance for certain other assets, offering more investment incentives.
National Living Wage On the Rise
For those employing staff, be aware that the National Living Wage is set to increase to £11.44 in April 2024. This is for workers aged 21 and over, a notable increase from the current rate.
Tackling Late Payments
To combat late payments, new rules will soon require firms bidding for government contracts worth over £5m to show a solid track record of timely payments. This is a step towards better cash flow for businesses.
Simplifying Making Tax Digital (MTD)
Making Tax Digital for Income Tax Self Assessment is getting simpler. The government plans to ease the requirements for quarterly updates and remove the need for an End of Period Statement, effective from April 2026.
Capital Allowances Made Permanent
Lastly, the 100% first-year allowance for qualifying plant and machinery expenditure and a 50% allowance for special rate expenditure are now permanent fixtures, offering long-term planning clarity.
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