Chancellor Jeremy Hunt announced several tax breaks for individuals and businesses in this year’s Autumn Statement ahead of the General Election next year. While they will help to put a little more money back into our pockets, other decisions made over many years on areas such as the freezing of tax thresholds make them less favourable than they first appear, according to many commentators.
Cuts in National Insurance Contributions (NICs) and major changes for pensions were just some of the big announcements, in the Autumn Statement on November 22, and there is also a freeze on alcohol duty until August next year, which is good news for those who have a favourite tipple.
What were the big announcements?
The NICs cuts were some of the most significant changes – with Class 2 NICs being abolished completely for the self-employed, and Class 4 NICs to fall from 9% to 8% in the next tax year. For employees, Class 1 NICs will also fall from 12% to 10%.
Pension changes are also in the offing too, with the biggest change set to be allowing everyone to have a single pension that they choose for themselves, and they keep for their lifetime, with each employer paying into that pension pot no matter how often they change employers. The real benefit of this is there would be less chance of it getting lost or forgotten about over time.
The State Pension will also rise by more than many commentators had expected, as the Chancellor confirmed the triple lock will remain in place. So, the State Pension will rise by 8.5% – the amount wages rose by in September.
For businesses, the biggest announcement was that full capital expensing which was a measure introduced in the Budget in March and was originally intended to last three years, will now become permanent.
This is just a very small number of the 110 measures the Chancellor announced on November 22. If you want to find out more details about what Jeremy Hunt had to say, you can read his Autumn Statement online, and you can find other supporting documents – which is where the finer details are outlined – at Gov.uk.
ISAs get much needed flexibility
Individual Savings Accounts (ISAs) were given a welcome boost from next April, as the rules will become more flexible, allowing multiple ISAs of the same type to be opened in a single tax year. It will also be possible to make partial transfers of ISAs opened in the current tax year, which gives far greater flexibility to ISA savers than they have previously enjoyed.
One of the main benefits of this change is that savers in Cash ISAs will have the option to benefit more easily from better savings rates as they appear throughout the tax year. Although you can transfer your ISA currently, it is much more restricted, and you would need to move all the money in one go.
It will also be possible to invest in ‘fractional shares’ – where you invest in part of a share in a business, rather than owning a whole share – something that to this point has not been available through an ISA.
However, the ISA limits remain the same – at £20,000 for adult ISAs and £9,000 for Junior ISAs – something many commentators are unhappy about.
IR35 and National Minimum Wage updates
IR35 has been one of the most hotly contested pieces of legislation HMRC has produced, and many people have ended up with huge tax bills after it was applied retrospectively. IR35 is used to determine whether a worker should be considered an employee and therefore under the PAYE tax regime, or whether they can be considered self-employed.
Most often, this question relates to contractors who may be working under their own limited company structure, but if they are working more for one employer than any other, then HMRC believes they should be an employee of that company instead. It has resulted in many high-profile court cases, including for Eamonn Holmes and Gary Lineker.
While the contentious legislation will remain in place, one major change that will be legislated for in the Finance Bill 2023 is to allow organisations who have incorrectly categorised off-payroll workers under IR35 rules, to reduce their additional PAYE liability. This will be done by offsetting Income Tax and Corporation Tax already paid by the worker or their intermediary, where they have been found to not comply with the IR35 rules. These changes will come into effect on April 6, 2024, and typically apply to higher earners.
However, those earning at the other end of the scale got benefits too in the Autumn Statement. Anyone being paid the National Minimum and Living Wage will see their pay increase by 9.88% to £11.44 across the UK for those aged 21 and over, from April 1, 2024. Young people and apprentices will see their wages rise to £6.40 per hour.
