Lucy Orrow - Lambert Chapman PartnerMy thoughts on today’s Autumn Statement…

National Insurance was introduced in 1911 and has changed and expanded ever since.

Our history of Classes 1, 2, 3 and 4, has today changed to remove Class 2 contributions.  This will save self employed workers £3.45 per week.  However, as ever, the devil is in the detail.

From 6 April 2024 workers with profits above £12,570 will not have to pay but can still access benefits including the State Pension.  This is similar to the current position, where workers who earn between £6,725 and £12,570 do not need to pay but receive a credit.

Workers whose profits are below £6,725 can make voluntary contributions if they wish to access the benefits and receive a state pension credit.

Along with the reduction in Class 4 rates from 9% to 8% from 6 April 2024, it will give our self employed workers a real tax saving.

Employees are also going to benefit from a reduction in their Class 1 contribution rate from 12% to 10% but this will be introduced from the earlier date of 6 January 2024.

The aim of all the changes is to see more money directly into workers pockets at a time when it is needed most.

These adjustments will be implemented automatically either via an employee’s payroll or on a tax return.  The self employed will not see the benefit for some time, as the reductions hit in the 2024/25 and so the tax saving will only show in the tax bill due on 31 January 2026.  This is some way off and maybe less visible when the time comes but I’m sure it will be a headline grabber in the papers.

As a footnote, I was interested to hear the proposed introduction of pension flexibility which should reduce the number of lots ‘pension pots’, if employees choose to pay into their own personal scheme, rather than be restricted to employers schemes.

Lucy Orrow – Tax Partner

Lambert Chapman Chartered Accountants

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