Autumn Statement 2023

Autumn Statement 2023

Autumn Statement 2023 - Key points in detail

Chancellor Jeremy Hunt announced his Spring Budget on Wednesday 15th March 2023. The big headlines were the expansion of free childcare, the scrapping of the lifetime allowance on tax-free pension contributions and the extension of energy bills support for households and a some other announcements will affect small businesses.

National Insurance contributions

Insurance contributions (NICs) system. Employees and NICs The government will cut the main rate of Class 1 employee NICs from 12% to 10 from 6 January 2024 so that employees can benefit as soon as possible.

The self-employed and NICs

The self-employed generally have to pay two forms of NICs:

Class 2 and Class 4.

Firstly, the government will abolish Class 2 self-employed NICs from 6 April 2024. This means that, from 6 April 2024:

• Self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs but will continue to receive access to contributory benefits, including the State Pension.

• Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits, including the State Pension, through a National Insurance credit without paying NICs.

• Those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension, will continue to be able to do so.

Dividend

The government has also confirmed that, from 6 April 2024, the rates of taxation on dividend income will remain as follows:

• the dividend ordinary rate - 8.75%

• the dividend upper rate - 33.75%

• the dividend additional rate - 39.35%.

As corporation tax due on directors’ overdrawn loan accounts is paid at the dividend upper rate, this will also remain at 33.75%.

The government will reduce the Dividend Allowance from £1,000 to £500 from 6 April 2024.

Income tax

Income tax rates

The government has stated that the basic rate will remain at 20%, the higher rate at 40% and the additional rate at 45% for

2024/25.

The government reduced the point at which individuals pay the additional rate of 45% from £150,000 to £125,140 for the current

tax year and this will continue for 2024/25.

Income tax allowances

The income tax personal allowance and basic rate limit are fixed at their current levels until April 2028. They are £12,570

and £37,700 respectively. For those entitled to a full personal allowance, the point at which they will pay income tax at the

higher rate will continue at £50,270

Pension Tax Limit

A number of changes were made to the tax regime for pensions or 2023/24 and these include the following, which will remain

at their 2023/24 levels for 2024/25:

• The Annual Allowance (AA) is £60,000.

• Individuals who have ‘threshold income’ for a tax year of greater than £200,000 have their AA for that tax year restricted. It is reduced by £1 for every £2 of ‘adjusted income’ over £260,000, to a minimum AA of £10,000.

• No Lifetime Allowance (LA) charge.

In addition, as previously announced the LA of £1,073,100 will be abolished from 2024/25. Changes will be made to clarify the taxation of lump sums and lump sum death benefits, and the application of protections, as well as the tax treatment for overseas pensions, transitional arrangements, and reporting requirements.

National Living Wage and National Minimum Wage

The government has accepted in full the recommendations of the Low Pay Commission and announced increased rates of the National Living Wage (NLW) and National Minimum Wage (NMW) which will come into force from April 2024. In addition, from April 2024 the NLW will be extended to 21 and 22 year olds.

The rates which will apply from 1 April 2024 are as follows: