Spring 2024 Newsletter

    Simpson Wood
    14th February 2024
    Home » Newsletters » Spring 2024 Newsletter

    Last November’s Autumn Statement included some positive news for workers. a 2% cut to class 1 national insurance contributions (NIC) has been granted to all employees from January 2024, giving everyone a bit more back from their pay packets for the new year. Meanwhile the self-employed have also had a percentage point taken off class 4 NICs, and class 2 NICs have been abolished except on a voluntary basis. Alongside this financial boost, simplified accounting processes will allow all businesses to use the cash basis for accounting, regardless of size.

    Further changes to business accounting practices have arrived in the form of making the cash basis the default accounting system for sole traders and partnerships, replacing accruals. Smaller businesses are no longer required to use the accruals system if they are over a certain size, streamlining accounting processes and also removing limits on interest costs. Making Tax Digital, the government’s strategy for automating business tax reporting for all businesses, has also slowed down. Now only self-employed workers with pay over £50,000 will join the scheme in 2026, and workers earning less than £30,000 will have their needs reviewed before any requirement to join is scheduled.

    Larger, incorporated businesses also have improved reliefs coming their way, alongside the headline-winning commitment to making full expensing permanent. The government is also clarifying the rules around R&D claims, which are being merged with SME relief to simplify the claiming procedure.

    All these changes however do nothing to improve the position of those paying the most tax on their income. The effect of ‘fiscal drag’ has increasingly hit higher earners the hardest, penalised with lost reliefs and allowances. Since the introduction of frozen tax thresholds and allowances those who pay the most tax have found their share of the overall tax burden increasing the most. Those with incomes near the £50,270 and £125,140 thresholds could pay extra into their pensions to bring their incomes down, but this solution will not work for everyone, and there may be other factors to consider.

    All savers and investors however will be able to benefit from the new relaxed ISA legislation coming in from April which has had the conditions around fund allocation relaxed. The ISA allowance will be transferrable between multiple accounts for the first time, making the best deals and rates more accessible.

    Find out more about these and other stories in our latest newsletter.

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