The Chancellor delivered his Autumn Statement today (17th November), outlining the government’s fiscal plans for the year ahead as the UK battles a 41 year high rate of inflation.
Announcing a £55bn package, made up tax changes and spending cuts in equal measure, Jeremy Hunt said this Budget will deliver stability and growth while protecting public services.
Alluding to the “difficult decisions” being taken to get the economy back on track, Hunt revealed a series of tax increases and freezes – the key development for freelancers and contractors being that the dividend tax threshold will be reduced, from £2,000 to £1,000 in April 2023, before halving again, to £500 in April 2024.
A notable omission from this Statement was IR35, though the Budget document published shortly after the Chancellor’s speech confirmed that the off-payroll working rules will remain in place.
In addition to this, other major Autumn Statement takeaways impacting independent workers and the UK’s smallest businesses were:
Income tax – the 45% income tax threshold will drop from £150,000 to £125,140 in April 2023. The basic rate (20%) and the higher rate (40%) thresholds will be frozen until 2028.
Personal allowance – additionally, the amount at which income tax applies (£12,570) will be frozen until 2028.
National insurance – similarly, national insurance rates have been frozen until 2028 – a move set to impact sole traders and employers.
VAT freeze – the threshold (£85,000) at which businesses must register for VAT will also be frozen until 2026.
Capital gains tax – the tax-free allowance for capital gains will more than halve, from £12,300 to £6,000 next April, before being slashed again to £3,000 in 2024.
National living wage – the national living wage (for those aged over 23) will rise from £9.50 to £10.42 from April 2023.
R&D tax credits – research and development tax credits available to small businesses will be cut, after the Chancellor cited concerns around fraud.
Business rates – a £13.6bn business rates tax cut over five years, with a review of rates also promised next year.
State pension – will increase in line with the rate of inflation (10.1%), with the Chancellor committing to protecting the triple lock.
The headline story for independent workers is the gradual erosion of the dividend tax threshold, which was as high as £5,000.
But arguably the tax freezes announced are just as significant. By freezing the personal allowance and national insurance rates, as earnings rise due to inflation, people will pay more in tax, earlier on.
It’s why these tax freezes have been described as ‘stealth taxes’.
The Chancellor had warned of tax increases across the board, so they weren’t unexpected.
However, as our CEO, Seb Maley, explained to Business Matters Magazine, the Autumn Statement does next to nothing for self-employed workers who have been “buried in bad news recently”.
It’s also impossible to ignore the fact that IR35 was overlooked, leading Seb to call for a review of this legislation in light of the fundamental flaws which continue to plague the legislation and in turn, contractors.
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