Autumn Statement 2023 

Key takeaways for small businesses and sole traders

As the autumn leaves fall, so does the annual revelation of the Autumn Statement, a pivotal moment for businesses to assess the economic terrain. 

At CJ Bookkeeping, we’ve dissected the latest fiscal updates to bring you the key takeaways that could shape your financial strategies in the coming months.

Income Tax Rates: Striking a Balance

The government has affirmed a consistent stance on income tax rates for the fiscal year 2024/25. The basic rate remains steadfast at 20%, the higher rate at 40%, and the additional rate at 45%. This predictability provides a stable foundation for financial planning.

In a notable adjustment, the government has reduced the threshold for the additional rate of 45% from £150,000 to £125,140. This modification, effective for the current tax year, extends into 2024/25. It’s imperative for individuals falling within this bracket to recalibrate their financial strategies accordingly.

The income tax personal allowance and basic rate limit are set in stone until April 2028. Currently standing at £12,570 and £37,700 respectively, these figures provide a baseline for individuals and businesses alike. For those entitled to the full personal allowance, the threshold for transitioning into the higher rate remains at £50,270.

Taxation Rates on Dividend Income

From April 6, 2024, the government has reaffirmed the taxation rates on dividend income, underscoring stability in the fiscal landscape. The rates stand as follows:

• Dividend Ordinary Rate: 8.75%
• Dividend Upper Rate: 33.75%
• Dividend Additional Rate: 39.35%

Importantly, the dividend upper rate, which also applies to corporation tax on directors’ overdrawn loan accounts, remains unchanged at 33.75%.

In a pivotal move, the government is set to reduce the Dividend Allowance from £1,000 to £500, effective April 6, 2024. This reduction holds implications for businesses and individuals alike, requiring a strategic reassessment of financial plans.

National Insurance Contributions

1. Employees and NICs: A Win for the Workforce

Effective from January 6, 2024, the government is set to reduce the main rate of Class 1 employee NICs from 12% to 10%. This swift adjustment is designed to provide immediate benefits for employees. According to government estimates, this move translates into a tax cut for a staggering 27 million working individuals. Notably, the average worker earning £35,400 can expect a tax cut exceeding £450 in the fiscal year 2024/25.

2. Self-Employed and NICs: A Comprehensive Restructuring

For the self-employed, the NICs landscape is undergoing a transformative shift. Beginning April 6, 2024, the government will abolish Class 2 self-employed NICs. Here’s a breakdown of the key changes:

• Self-employed individuals with profits above £12,570 will no longer be obligated to pay Class 2 NICs while retaining access to crucial contributory benefits, including the State Pension.
• Those with profits between £6,725 and £12,570 will maintain access to contributory benefits through a National Insurance credit, without the necessity of paying NICs.
• Individuals with profits under £6,725 and those voluntarily paying Class 2 NICs to secure contributory benefits, including the State Pension, can continue doing so.

The government has committed to outlining the next steps for Class 2 reform in the coming year, signaling an ongoing commitment to clarity and transparency in policy changes.

National Living Wage and National Minimum Wage

From April 2024, increased rates for both the National Living Wage and National Minimum Wage will come into effect.

The new rates effective from April 1, 2024, are as follows:

• NLW (21 and over): £11.44
• 18-20: £8.60
• 16-17: £6.40
• Apprentices: £6.40

It’s crucial for businesses to familiarise themselves with these rates to ensure compliance and uphold fair compensation practices.

Business Rates and Tax Landscape

1. Business Rates: Freeze and Extensions

• Small Business Multiplier: Frozen for another year, providing stability for small businesses.
• Retail, Hospitality, and Leisure Relief: Extended at 75% for the fiscal year 2024/25.
• Standard Multiplier: Uprated in line with September’s Consumer Prices Index.

2. Freeports and Investment Zones: Prolonged Benefits

• Both regimes extended from the initially planned five years to a decade.
• Businesses in specified locations to benefit from Stamp Duty Land Tax relief, enhanced capital allowances, structures and buildings allowances, and secondary Class 1 NIC relief for eligible employers.

3. Capital Allowances: Permanency and Full Expensing Rules

• Full Expensing Rules: 100% write-off on qualifying expenditure for most plant and machinery, now made permanent.
• Annual Investment Allowance: Remains at £1 million per 12-month period.

4. Research and Development (R&D): Merger and Compliance Focus

• RDEC and SME schemes to merge, with the new scheme effective from April 2024.
• Compliance action plan announced to address high levels of non-compliance with R&D rules.

5. Corporation Tax Rates: Stability Maintained

• Rates to remain unchanged, with the main rate at 25% for profits over £250,000.
• Small profits rate at 19% for profits of £50,000 or less, with a gradual increase in the effective corporation tax rate for profits between £50,001 and £250,000.

6. VAT: Thresholds and Inclusivity

• VAT registration and deregistration thresholds remain at £85,000 and £83,000 respectively until April 2026.
• VAT zero rate relief extended to reusable period underwear from January 2024.

7. Capital Gains and Inheritance Tax: Changes and Stability

• Capital Gains Tax Annual Exempt Amount: Reduced from £6,000 to £3,000 from April 2024.
• Inheritance Tax Nil-Rate Bands: Fixed until April 2028.

Pension Tax Limits: Planning for the future

The pension tax landscape has seen several noteworthy changes for the fiscal year 2023/24, and these adjustments are set to persist into 2024/25.

Annual Allowance (AA) Insights

For the upcoming fiscal year, the Annual Allowance (AA) remains at £60,000. However, individuals with a ‘threshold income’ exceeding £200,000 will witness a reduction in their AA. This reduction occurs at a rate of £1 for every £2 of ‘adjusted income’ over £260,000, with a minimum AA set at £10,000.

Lifelong Allowance (LA) Changes

In a significant move, the Lifetime Allowance (LA) charge, which stood at £1,073,100, is slated for abolition from the fiscal year 2024/25. This shift holds implications for high-value pensions and underscores the need for businesses to reassess their pension structures.

Enhanced Clarity and Reporting Requirements

Beyond numerical changes, the Autumn Statement introduces enhancements to clarify the taxation of lump sums, lump sum death benefits, and the application of protections. Additional focus is directed towards refining the tax treatment for overseas pensions, introducing transitional arrangements, and addressing reporting requirements.

Get in touch

We hope you found our key takeaways helpful. 

Further information is available on the government website.

Remember, the information provided in this blog is for general guidance only and should not be considered as professional advice. For personalised assistance, do get in touch.