As you may be aware, the UK government announced the Autumn Statement yesterday. There was very little in this of value to most small and medium sized businesses but there are a few points that are worth highlighting and being aware of.
Minimum Wage Increase and Age Requirement For National Loving Wage Dropped
Effective from April 2024, the living wage will be increased from £10.42 per hour to £11.44 per hour. In addition to this, from April 2024 the age requirement to qualify for this full rate has been dropped from age 23 to age 21, so be sure to check whether your younger staff now qualify for the full rate rather than the old minimum wage rate which applied for those under 23.
Class 4 NIC (Self Employed NIC) Dropped from 9% to 8%
Self explanatory – this applies to anyone operating as a sole trader, but not to limited companies. A minor change but a welcome one.
Dividend Tax Free Allowance to Drop to £500
Another policy which is being slowly abandoned by the government. A few years ago everyone could earn £5,000 of dividends tax free, this has been phased out year on year. It will now drop to merely £500.
Frozen Tax Bands
More of a “stealth tax” than anything else, but normally the government increase the bands for personal allowances and national insurance in line with inflation and with minimum wage increases. They have declined to do so (again) this year, which combined with inflation essentially means that they have been able to increase the tax take from all taxpayers in the country. More of your staff and company owners themselves will be earning more on paper which is consumed by inflation, but will now be paying higher amounts to the government as the tax free allowances have not increased in line.
Merged R&D Schemes
For any clients making R&D claims, the calculations are set to change substantially for all claims made after January 2024. This is on top of the recent large increase in paperwork.
Going forward the small and large company schemes are being combined together and actual refunds will be heavily restricted, with the government instead focusing this relief on Corporation Tax Savings.
Summary
There is little to raise any eyebrows here. There was an announcement about better HMRC funding which gave us some hope that HMRC’s historically appalling service levels might improve, but this turned out to be a false hope as the Chancellor has earmarked that money to be spent solely on pursuing debts – an area in which HMRC are incredibly wasteful. We note and many of you will have experienced first hand the enormous wasted time that comes from HMRC pursuing debts which do not exist because the entire rest of the organisation is completely under-resourced and their records are riddled with errors. Unfortunately it seems that they intend to continue burying their head in the sand about the underlying problems here for the forseeable future.