Autumn Statement – Good News For The Self-Employed?

Autumn Statement – Good News For The Self-Employed?

Nov 22, 2023

Workwell News

Today’s Autumn Statement revealed welcome news for self-employed workers and contractors, with a number of unexpected tax breaks.

The main headline was National Insurance Contributions (NICs).

  • Class 2 National Insurance which is paid by self-employed people earning over £12,570 is to be abolished from April 2024.
  • Class 4 National Insurance, also for self-employed people and paid on profits between £12,570 and £50,270 is to be cut from 9% to 8% from April 2024.

 

The decrease in NICs will cost the Treasury £10.4bn by 2027/28.

However, the lower National Insurance contributions may be largely cancelled out by the cost of living. This is because there was no increase to the personal allowance (the amount you can earn before tax is due) or the thresholds for income tax, which affects Umbrella workers, or dividend tax, which affects limited company contractors.

Other headlines of note to freelancers & contractors

There was also an increase in the National Living Wage from £10.42 an hour to £11.44 an hour and will apply to workers aged 21 and above. Previously the NLW was applicable to those aged 23+.

And there was further good news for those approaching retirement age with an increase in state pension payments of 8.5% in line with average earnings.

Our view?

Chris Mollan, Head of Accountancy Services, said: “To some, this might be a move to attract more voters for the upcoming general election and deflect from some of the criticism the government has received recently.

“However, you can’t deny that these National Insurance tax breaks, which also include a reduction in the Employee National Insurance % (from 12% to 10%) that comes into effect from January 2024, will help the pocket of many people.

“What was missing was investment and any tax break to help businesses grow. In the run-up to a general election, the emphasis is usually on quick, direct gains rather than long-term proposals.”

Other key ‘need to knows’

The Chancellor announced a package of measures around benefits, including an increase of 6.7% on Universal Credit; funding of £1.3bn to help peoplw ith health conditions to find jobs; reform to the Work Capability Assessment to reflect the availability of home working opportunities following the Covid pandemic; and an increase in Local Housing Allowance rates to 30% of local rents.

Businesses that need to invest in new machinery and equipment can now benefit from a ‘full expensing’ tax break which allows them to deduct 100% of the cost from profits, thereby making a Corporation Tax saving.

How is the economy?

The Office for Budget Responsibility said the economy is forecast to grow slower than expected at 0.7% next year, not 1.8% as previously predicted.

The OBR doesn’t expect inflation to fall back to the Bank of England’s 2% target until 2025 which means interest rates will hve to remain high for some time to control inflation.

 

Need help?

If you need help in understanding what the Autumn Statement means to you, please get in touch with a member of our team.

You can find out more about our specialist accountancy packages for sole traders, contractors and small business owners or speak to a specialist for tailored advice.

Read more on the BBC News website.

Visit the OBR website.

 

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