THE AUTUMN STATEMENT 2023
On 22 November 2023, Jeremy Hunt delivered the ‘Autumn Statement for Growth’. Against an improving economic backdrop, the Chancellor is keen to stimulate economic growth and highlighted 110 measures for businesses. In addition, there were significant statements relating to National Insurance changes and also the reform of work-related state benefits. Income tax Income tax rates The Scottish and Welsh governments will make their announcements on the devolved elements of taxation policy in due course.
National Insurance contributions The Chancellor announced major changes to the National 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. Comment According to the government, this will provide a tax cut for 27 million working people with the average worker on £35,400 receiving a cut in 2024/25 of over £450. 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.
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. Dividends 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. Comment It is estimated that the reduction in the Dividend Allowance will affect £4.4 million individuals in 2024/25 with the average loss to those affected being around £155.
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