Last month the Chancellor, Jeremy Hunt MP, unveiled his Autumn Statement, setting out the Government’s tax and spending commitments for the next year.
The backdrop to this year’s Autumn Statement presents a number of challenges for a government with, at most, a little over a year until the next General Election. The UK’s inflation rate stands at 4.6%, more than double the Bank of England’s target of 2%. Growth rates have stalled, and the Bank of England is predicting that the UK will see zero growth until 2025.
The FCSA (Freelancer & Contractor Services Association) recently released their summary on the speech, and for our advice hub, we’ve brought you the key updates and announcements.
Financial Updates;
⚜ Off-Payroll Working (IR35) – calculation of PAYE liability in cases of non-compliance – The government will legislate in the Autumn Finance Bill 2023 to allow HMRC to reduce the PAYE liability of a deemed employer to account for taxes paid by a worker and their intermediary on payment.
⚜ The government is legislating in the Autumn Finance Bill 2023 to introduce tougher consequences for promoters of tax avoidance schemes. These include a new criminal offence for those who continue to promote avoidance schemes after receiving a notice requiring them to stop; and a new power enabling HMRC to bring disqualification action against directors of companies involved in promoting tax avoidance, including those who control or exercise influence over a company. These changes will take effect from Royal Assent of the Autumn Finance Bill 2023
⚜ The government is legislating in the Autumn Finance Bill 2023 to require employers, company directors, and the self-employed to provide new or improved data to HMRC to enable better outcomes for citizens and businesses. These changes will take effect from the tax year 2025-26.
⚜ The government is announcing that HMRC will rewrite guidance around the deductibility of training costs for sole traders and the self-employed. This measure will clarify the guidance to ensure that individuals can be confident that updating existing skills, maintaining pace with technological advances, or changes in industry practices are allowable costs when calculating the taxable profits of a business.
⚜ The government is investing a further £163 million to improve HMRC’s ability to manage tax debts. This will allow HMRC to better distinguish between those who can afford to settle their tax debts, but choose not to, from those who are temporarily unable to pay and need support. HMRC will also expand its debt management capacity to support both individual and business taxpayers out of debt faster and collect debts that are due.
Key announcements from the speech were as follows:
National Insurance
⚜ There will be a 2% cut to national insurance, coming into effect from January, worth £450 for average worker. The main rate for employee national insurance from 12% to 10%, with 27 million people expected to benefit.
⚜ Abolition of the Class 2 National Insurance paid by self-employed. This will result in saving the average self-employed person £192 a year.
Minimum Wage
⚜ A rise in the National Living Wage to £11.44 per hour and is expected to be implemented from April next year. The rate is currently £10.42 an hour for workers over 23, but the new rate will also apply to 21 and 22-year-olds for the first time. Other age groups, including apprentices, will also get a pay increase.
Tax changes and benefits
⚜ For businesses, the Chancellor has made permanent the tax break knows as “full expensing”. This tax break was initially due to expire in 2026.
⚜ Working-age benefits such as Universal Credit, and disability benefits will increase next year by 6.7%, the inflation rate for September.
Pensions
⚜ From April 2024 the Chancellor will increase the full new state pension by 8.5% to £221.20 a week, worth up to £900 more a year, and has committed to the triple lock.
To read the perspective of FCSA’s Chief Executive on the Autumn Statement, follow this link to their website.
Do you have any questions on this summary? Reach out to the Bishopsgate team, on this, or any other umbrella payroll concerns you might have.