As we anticipate the upcoming General Election, the Chancellor's recent Autumn Statement brought significant announcements particularly relevant to small businesses in the UK. These include various tax and spending adjustments, with a special focus on National Insurance modifications. Here’s a concise overview of what small business owners need to know:
National Insurance Adjustments: A major highlight is the overhaul of National Insurance contributions. This is particularly relevant for around two million self-employed individuals due to changes in Class 2 and Class 4 contributions.
Elimination of Class 2 Contributions: Starting April 2024, self-employed individuals will no longer need to pay Class 2 National Insurance contributions. Those earning between £6,725 and £12,570 will be exempt from these payments but will still receive benefits like the State Pension.
Class 4 Contributions Reduction: From April 2024, there will be a reduction in Class 4 contributions for the self-employed, dropping from 9% to 8% for profits between £12,570 and £50,270.
Class 1 Contributions Cut: Employees will also see a reduction in their Class 1 National Insurance contributions from 12% to 10% on certain earnings, effective from January 2024.
Permanent Full Expensing Policy: The full expensing policy, allowing businesses to offset certain equipment investments against their profits, will now be a permanent fixture. This is a significant boost for businesses planning substantial investments.
Business Rates Relief: The small business multiplier for business rates in England remains frozen, with additional relief extended to Retail, Hospitality, and Leisure sectors.
National Living Wage Increase: The National Living Wage is set to rise to £11.44 in April 2024, applicable to workers aged 21 and over.
Late Payment Measures: To combat late payment challenges, from April 2024, companies bidding for government contracts must adhere to stricter payment timelines.
Cash Basis Accounting Changes: Post-consultation, the government plans to make cash basis accounting the default method from April 2024, among other changes.
Simplifying Making Tax Digital: The government’s review has led to simplifications in the Making Tax Digital framework, particularly benefiting small businesses.
These changes are poised to significantly impact the landscape for small businesses. For a more comprehensive understanding and how these could specifically affect your business, we recommend reading the full government report. Stay informed to make the most of these developments for your business growth.