With most measures ‘leaked’ beforehand, today’s Statement promised an NI cut for workers and the self employed, plus a pledge to make the full expensing relief capital allowances permanent.
There were no standout measures for the majority of contractors, although umbrella workers will benefit from the NI cut.
There was no reversal of the recently hiked Corporation Tax rates, nor changes to IR35 (aside from fixing the ‘offset’ issue, which is as expected).
No changes were announced to Inheritance Tax or Stamp Duty Land Tax either. Perhaps the Chancellor will hold back any headline-grabbing measures for a pre-election budget.
Key points from today’s Autumn Statement
- Inflation is predicted to fall to 2.4% by the end of 2024.
- The rate of Class 1 Employees’ National Insurance – currently 12% – will be cut to 10% from 6th January 2024. This will – according to the Chancellor – benefit the typical employee by £450 per year. See below.
- Class 2 NICs – paid by the self employed – will be abolished completely from 6th April 2024.
- Class 4 NICs – also paid by the self employed – will be cut by 1% from 9% to 8% from 6th April 2024.
- Businesses will benefit from ‘full expensing’ being made permanent. This allows companies to offset the cost of investing in things like IT and machinery against their tax bills.
- Business rates – the small business multiplier to be frozen for a fourth consecutive year.
- The National Living Wage increases from £10.42 to £11.44 per hour from April 2024. The age threshold cut from 23 to 21.
- The state pension will rise by 8.5%. Benefits will increase by 6.7%.
How will the NI cut affect contractors?
Class 1 Employees’ NICs will be cut from 12% to 10% on salaries between £12,570 and £50,270.
Most limited company owners tend to pay themselves low salaries and so are unlikely to benefit from this measure.
However, umbrella company contractors could be over £500 better off per year once the cut goes ahead on January 6th 2024 as all of their income is subject to income tax and NICs.
If you earn £50,000, for example, you will pay £748.60 less in NI next year.
IR35 – calculation of PAYE liability in cases of non‑compliance
As expected, in section 5.50 of the green book, the government confirmed a resolution to the IR35 offset issue, whereby double taxation can occur in the case of HMRC overturning an IR35 determination.
The government will legislate in the Autumn Finance Bill 2023 to allow HMRC to reduce the PAYE liability of a deemed employer to account for taxes paid by a worker and their intermediary on payments received where an error has been made in applying the off-payroll working rules.
Will tax avoidance promoters finally get what they deserve?
Section 5.59 states that there will be tougher consequences for promoters of tax avoidance schemes.
The forthcoming charges will include:
a new criminal offence for those who continue to promote avoidance schemes after receiving a notice requiring them to stop; and a new power enabling HMRC to bring disqualification action against directors of companies involved in promoting tax avoidance, including those who control or exercise influence over a company.
Until now, only individual users of tax avoidance vehicles have been penalised for their participation in such schemes. Will the government now finally take action to stamp out tax avoiders, who often operate in plain sight?
More to follow…
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