The Chancellor has revealed his latest plans for the nation’s finances – including cutting National Insurance Contributions rates, continuing business rates relief and confirming the increase in the National Minimum Wage. According to the government, the measures announced will help people get back into work and boost growth by reducing debt, cutting taxes and rewarding work.
Here’s our round-up of the key announcements and their potential impact for you:
Cuts to the rates of National Insurance Contributions
- Class 1 Employee National Insurance Contributions rate is being reduced by 2% to 10% from 6 January 2024. The analysis shows that this results in a £450 saving for the average employee on a salary of £35,000
- Class 2 National Insurance Contributions of £3.45 per week are to be abolished from April 2024. These are paid by the self-employed earning more that £12,570 per year. This will not affect the self-employed access to benefits and credits.
- Class 4 National Insurance Contributions are to be reduced by 1% to 8% from April 2024, saving the average self-employed person £340 per year.
The government is continuing to provide small businesses with rates relief by freezing the multiplier for another year. They have also committed to continuing the 75% discount for retail, hospitality and leisure businesses for another year.
Business tax relief for purchases of equipment made permanent
For companies that invest in equipment, such as IT equipment and factory machinery, the full tax relief on the investment in one go in the year of purchase is now being made permanent, following its introduction earlier this year. This gives corporation tax relief of 19% – 25% depending on the level of profits. The previous upper limit of £1m per year indicates that this is only relevant to companies spending more than this each year on assets.
Investment in technology
The government has committed £500m to fund innovation in AI technology and will also be simplifying tax relief for Research and Development from April 2024.
National Living Wage
This has been increased to £11.44 per hour from April 2024, an increase of £1.02 on the current rate of £10.42. The new rate will apply to all over 21, bringing the eligible age down from 23.
The rates for all other age brackets have also increased.
Businesses employing staff on this living wage will need to keep an eye on the impact this has on their margins.
Benefits increases were announced in the following areas:
- Pension triple lock to be honoured and state pension payments will increase by 8.5% in 2024
- Benefits will increase by 6.7%, in line with the rate of inflation in September 2023
- The local housing allowance freeze is being removed to help with rising rent costs – good news for some of our landlord clients operating in this sector
Those clients working in the property development sector will be pleased to hear that the Chancellor promised measures to ‘unlock the building of more homes’, including plans to force local authorities to refund planning fees if they take too long to handle planning applications. There will also be funding pumped into the planning sector to speed up the current backlog.
Freeze on alcohol duty – time to hit the pub!
The hospitality industry is celebrating the decision to freeze alcohol duty until August 2024.
Rumoured changes to Capital Gains Tax, Inheritance Tax and Corporation Tax did not materialise. We will let you be the judge of how this budget affects you – Mr Hunt certainly didn’t rock our world today!
No doubt there will lots of detail from the media and commentators over the coming days and weeks; hopefully our summary gives you a useful overview of the key announcements. As always, we’re here for any questions that you may have.