Chancellor Jeremy Hunt has delivered the Autumn Statement 2023, announcing tax and rates changes which affect the self-employed, business owners, employees and employers. The updates are rolling out at various stages, though some can be expected to start at the beginning of the new tax year in April 2024.
• Business rates
• Full expensing
• National Living Wage and National Minimum Wage
• Employees and employers – National Insurance
• Self-employed people – National Insurance
• R&D tax relief changes
Business rates
The previously announced support package to help those paying business rates will continue, with Hunt saying he will extend the 75% discount on business rates up to £110,000 for retail, hospitality and leisure until 2025.
The Chancellor will also freeze the small business multiplier for a further year, although the large business multiplier will not be frozen.
Full expensing update for businesses
Full Expensing (FE) is a type of first-year capital allowance which permits companies to deduct the full amount of any spending that qualifies from their taxable profits in the year the expenditure occurs.
Originally announced as a temporary measure in the Spring Budget 2023, Full Expensing has now been made permanent.
National Insurance – employees and employers
Although the thresholds for National Insurance will remain frozen until April 2028, the main rate of Class 1 National Insurance payable by employees on their wages between £12,570 and £50,270 will reduce from 12% to 10%.
National Insurance for employers remains unchanged, although employer’s NI relief for veterans is extended by one year, and the £5,000 Employment Allowance will stay in place.
2023/24 and 2024/25 Class 1 (Primary) National Insurance thresholds and rates for employees
| 2023/24 Weekly Threshold |
2023/24 Annual Threshold |
2024/25 Weekly Threshold |
2024/25 Annual Threshold |
|
| Lower Earnings Limit (LEL): Employees earning less than this limit won’t incur National Insurance, or accrue benefits such as qualifying payments towards their State Pension.
Earnings which are more than the threshold, but below the Primary Threshold still won’t incur NI, but employees will earn NI ‘credits’, and accrue NI benefits. |
£123 | £6,396 | £123 | £6,396 |
| Primary Threshold: Earnings above the Primary Threshold up to (and including) the Upper Earnings Limit incur National Insurance at the following rates:
6th April 2023 – 5th January 2024: 12% 6th January 2024 – 5th April 2024: 10% 2024/25: 10% |
£241.73 | £12,570 | £241.73 | £12,570 |
| Upper Earnings Limit (UEL): Earnings above the Upper Earnings Limit: incur NI at:
2023/24: 2% 2024/25: 2% |
£967 | £50,270 | £967 | £50,270 |
National Insurance – self-employed people
As a self-employed person you’ll make National Insurance contributions based on the profits you make above the National Insurance threshold (so don’t forget to claim tax relief on your expenses!). There are two types of self-employed National Insurance:
• Class 2 National Insurance is a weekly flat rate. This will be abolished from April 2024
• Class 4 National Insurance is a percentage of your self-employed profits. From April 2024, Class 4 NI reduces from 9% to 8%
| 2023/24 Annual Threshold |
2024/25 Annual Threshold |
|
| Profits in this range don’t incur National Insurance, but you can make voluntary contributions if you want to. | £0 – £6,724 | £0 – £6,724 |
| Small Profits Threshold (SPT): Profits between this and the Lower Profits Threshold (LPT) don’t incur National Insurance, but you will accrue National Insurance credits. | £6,725 | £6,725 |
| Lower Profits Threshold (LPT): In 2023/24 you’ll pay Class 2 National Insurance at a flat rate of £3.45 per week once profits reach the threshold. Class 2 National Insurance will be abolished from April 2024 onwards.
2023/24: £3.45 per week 2024/25: Abolished |
£12,570 | Abolished |
| Lower Profits Limit (LPL): You’ll start paying Class 4 National Insurance on earnings above this threshold at a rate of:
2023/24: 9% 2024/25: 8% |
£12,570 | £12,570 |
| Upper Profits Limit (UPL): Self-employed profits above this threshold incur Class 4 National Insurance at a lower rate:
2023/24: 2% 2024/25: 2% |
£50,270 | £50,270 |
An increase to National Living Wage and National Minimum Wage from April 2024
The National Living Wage is the minimum amount employers must pay to someone who is aged 23 or older, and not in the first year of an apprenticeship. The Chancellor’s statement announced that as of 1st April 2024:
• National Living Wage will increase from £10.42 to £11.44 per hour
• The rate will also apply to those aged 21 and older (who currently must receive National Minimum Wage at a rate of £10.18)
Though they sound similar, the National Living Wage and minimum wage are different. The National Minimum Wage (NMW) sets the minimum hourly rate which employers must pay younger employees and apprentices. These rates will also increase from 1st April 2024 although the amounts have not yet been set.
R&D tax relief changes
Hunt announced a planned simplification of the current Research and Development (R&D) system, merging the existing R&D Expenditure Credit (RDEC) and SME schemes from April 2024 onwards.
The Chancellor also confirmed a reduction in the ‘intensity rating’. This refers to the proportion of expenditure that loss-making businesses must spend on R&D activities in order to qualify for additional relief in the form of a 10% cash credit.
Under current rules, R&D must account for 40% of a loss-making company’s spending to qualify, but this will reduce to 30% for accounting periods that start on or after 1 April 2024.
There will also be a grace period for companies which dip below the 30% threshold, allowing them to continue receiving relief for one year.
How Account-Ease Can Help You
As the UK’s most trusted accountants, we can help you make sense of the Autumn Budget and how it could impact your business. Our accountants are on-hand to answer any queries you have regarding the Budget, your business accounting, tax optmisation, compliance and much more.
If you need an accountant that you can trust with your finances, Account-Ease have specialists in your field. For expert advice, speak to an accountant on 0208 133 4599.
