As autumn leaves fall and the temperature drops, the financial landscape in the UK experiences its own season of change with the release of the Autumn Statement. The eagerly anticipated update, presented by Chancellor Jeremy Hunt last week, outlined the government’s fiscal plans and economic policies. It’s important for Businesses and Workers to understand the implications of this year’s Autumn Statement and how it affects them. The team at Rocket Paye are here to give you the run down on all things Autumn Statement – we’re even hosting a Webinar to answer your burning questions! But first… let’s recap what was spoken about last Wednesday.
Economic Overview
The Autumn Statement is not just a financial roadmap; it serves as a comprehensive overview of the UK’s economic health. It gives the chancellor opportunity to provide insights into economic growth, inflation rates, and employment figures. This year there has been a keen focus on sustainability and green initiatives, reflecting the global shift towards a more environmentally conscious economy.
Changes To National Insurance Contributions
Significant adjustments to National Insurance Contributions (NICs) have been revealed, aimed at providing relief for both employees and self-employed individuals. Starting from the 6th of January 2024, the main rate of Class 1 employee NICs will see a reduction from 12% to 10%, and come 6th of April 2024, the main rate of Class 4 self-employed NICs will decrease from 9% to 8%. Additionally, a noteworthy change is the elimination of the requirement to pay Class 2 self-employed NICs starting April 6, 2024.
To delve into the details of this transformation:
- Self-employed individuals with profits exceeding £12,570 as of April 6, 2024, will be exempt from paying Class 2 NICs while retaining access to essential contributory benefits, including the State Pension.
- Those with profits ranging between £6,725 and £12,570 will maintain access to contributory benefits through a National Insurance credit, without the need to pay NICs.
- Individuals with profits under £6,725 and those voluntarily paying Class 2 NICs to access contributory benefits, including the State Pension, will continue to have this option.
Looking ahead, the government plans to outline the next steps regarding Class 2 reform in the coming year. As we anticipate further guidance on these changes, it is advisable to take proactive measures now. It is encouraged to start collaborating with your payroll provider and prepare for the implications of these changes together.
Tax Relief Updates:
Exciting changes in tax reliefs have been unveiled, with a focus on bolstering support for Research and Development (R&D) intensive small and medium-sized enterprises. Additionally, freeport tax reliefs see an extended ‘sunset date,’ offering businesses prolonged opportunities. Notably, administrative tweaks to creative industry tax reliefs aim to streamline processes and enhance their effectiveness.
There are also plans in place to revamp Make Tax Digital (MTD) for Income Tax Self Assessment (ITSA):
In a bid to simplify and enhance the system for taxpayers and their representatives, the government is set to implement design changes to MTD for ITSA. The upcoming modifications include the removal of the End of Period Statement requirement and exemptions for certain taxpayers, including those without a National Insurance number. Furthermore, MTD users will now have the flexibility to be represented by more than one tax agent. Stay tuned for the release of draft regulations, scheduled for technical consultation later in 2023. These changes promise a more user-friendly and inclusive tax management experience.
Boost to National Living Wage:
In a significant move by the chancellor, nearly 3 million low-paid workers are set to experience a substantial pay increase of almost 10% come spring, as the national living wage climbs to £11.44 per hour. Jeremy Hunt highlighted that this adjustment would lead to an annual rise of £1,800 for full-time workers, aligning with the 2019 Conservative commitment to eradicate poverty pay in the UK, as recognized by the Low Pay Commission (LPC).
The chancellor fully endorsed the LPC’s recommendation, marking the announcement as the largest-ever cash increase in the national legal minimum wage, elevating it from £10.42 to £11.44. This development unfolds against the backdrop of a prevailing cost-of-living crisis, with inflation hitting 11.1%, the highest in 40 years. To further extend the reach of the national living wage (NLW), the age threshold will be lowered from 23 to 21.
According to the Treasury, this adjustment translates to a 12.4% increase for 21-year-olds, moving from £10.18 this year to £11.44 next year. This amounts to nearly £2,300 annually for a full-time worker in this age bracket. Furthermore, younger workers aged between 18 and 20 will also witness an uptick in their national minimum wage rates, receiving a wage boost to £8.60 per hour—a noteworthy £1.11 hourly increase. This proactive step addresses the evolving economic landscape and aims to provide meaningful relief to a substantial segment of the workforce.
Off-Payroll Working (IR35) – Adjustments to PAYE Liability in Non-Compliance Cases
The chancellor also revealed that in the upcoming Finance Bill 2023, the government is set to introduce legislation that empowers organizations to mitigate their additional PAYE liability in situations of non-compliance with the off-payroll working rules. This adjustment takes into consideration Income Tax and Corporation Tax already paid by a worker and their intermediary. The implementation of these changes is scheduled for April 6, 2024. Furthermore, a comprehensive summary of responses gathered from the consultation initiated in April 2023 has been made public, shedding light on the collective input received on this crucial matter – available to view here. (https://www.gov.uk/government/consultations/off-payroll-working-calculation-of-paye-liability-in-cases-of-non-compliance/outcome/off-payroll-working-calculation-of-paye-liability-in-cases-of-non-compliance-summary-of-responses)
Webinar Alert: Unpacking The Autumn Statement:
To provide a more in-depth understanding of the Autumn Statement’s implications, we will be hosting a webinar on December 6th. Expert speakers will analyse the key points raised in the Autumn Statement and shed light on how they may impact businesses, individuals, and the broader economy. The webinar will also cover umbrella regulation, offering valuable insights for those navigating the evolving regulatory landscape.
To sign up, register now with this link – https://events.teams.microsoft.com/event/a3948e5e-0e6d-4c72-977e-9f9532b0244d@5082aa83-b7a6-4cc7-a55b-0ec62197983a
To view our event on LinkedIn, click here.