The Autumn Budget Breakdown
Whilst today’s Autumn Statement has brought about some changes it did not have any of the Inheritance Tax reforms which had been rumoured in recent weeks.
Below is a summary of today’s main tax announcements:
Reduction in National Insurance Contributions (NIC)
Employees who incur Class 1 NIC will see a reduction in NIC deducted from their wages as the rate is reduced from 12% to 10%. This should see individuals on an annual salary of £35,400 saving approximately £450 per year. The reduction will be introduced from 6 January 2024.
The Chancellor hopes that reducing the tax burden for basic rates tax payers to 30% will increase the number of people in work. But will this reduction help relieve the burden of fiscal drag which will be felt as inflation sees wages increase whilst tax & NIC thresholds remain frozen?
Class 4 NIC which is charged on those self employed will be reduced from 9% to 8% with effect from 6 April 2024.
A self-employed person earning £28,200 per year will see a saving of £350 as a result.
Class 2 NIC which is also payable by those who are self employed will be abolished from 6 April 2024. The contributions currently amount to approximately £180 per annum.
In Spring 2023 a temporary first year allowance was introduced which enabled a first-year allowance of 100% on qualifying capital main rate expenditure (50% for special rate expenditure). This FYA, known as Full Expensing, was due to expire in March 2026 but the Chancellor has announced that this will now be a permanent allowance.
The allowance is aimed at encouraging businesses to keep investing and help grow the economy, but those who had perhaps planned to bring forward expenditure to avail of the temporary allowance may now choose to delay.
Uplift in National Living and Minimum Wage
From 1 April 2024 the National Living wage will increase to £11.44 per hour. The age threshold will be reduced from 23 to 21 years old.
The national minimum wage will be increased to £8.60 an hour for 16–17 year olds and to £6.40 an hour for apprentices.
Relief for Enterprise Investment Schemes (EIS) and Venture Capital Trusts Extended (VCT)
Taxpayers who invest in EIS and VCT can avail of tax relief. This relief was due to expire on 5 April 2025 but has now been extended. New legislation will see the reliefs extended to 2035.