In this Autumn Statement, the Chancellor announced a raft of tax and spending changes that will affect UK small businesses – including major changes to National Insurance. 

 

Class 2 National Insurance – Abolished

From April 2024, no one will be required to pay Class 2 self-employed NI contributions.

If you are self-employed with profits above £12,570, you pay a weekly flat rate of £3.45, but this will be scrapped starting 6th April 2024. However, you will continue to receive access to contributory benefits,
including the state pension.

Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits, including the State Pension, through national Insurance credits. You won’t actually have to pay any National Insurance.

Those with profits under £6,725 and others who pay Class 2 NI contributions voluntarily to get access to contributory benefits, including the State Pension, will continue to be able to do so.

The main rate of Class 2 NI contributions had been due to rise to £3.70 per week in April 2024. But for those paying voluntarily, the current rate of £3.45 per week will be maintained for 2024-25.

Class 4 National Insurance – Cut By 1%

Class 4 self-employed NI contributions are to be cut from 9% to 8% from 6th April 2024. Self-employed people will pay Class 4 NI at the new rate of 8% on profits between £12,570 and £50,270 per year and at 2% on profits over £50,270.

Class 1 Employee’s National Insurance – Cut By 2%

Class 1 NI employee’s contributions are also to be cut. From 6th January 2024, these will be reduced from 12% to 10% on earnings between £12,571 and £50,271 (and will remain at 2% on anything above that). 

National Living Wage Rise

The National Living Wage will increase to £11.44 from April 2024. The new rate will apply to workers aged 21 and over. 

Cash Basis – Changes

The government is to introduce changes to cash basis accounting following a consultation launched earlier
this year. 

From 6th April 2024, the changes introduced by the government will mean:

• cash basis is set as the default, with an opt-out for accruals (which is the reverse of the current position where
  accruals is the default) 
• the turnover threshold for businesses to use the cash basis will be removed
• the £500 limit on interest deductions in the cash basis will be removed
• restrictions on using relief for losses made in the cash basis will be removed

For more information, you can read the government’s consultation outcomes here. Government’s Consultation

Simplifying Making Tax Digital – Changes

The Autumn Statement also references the outcome of the government’s review into the impact of Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) on small businesses, which was published
today. Outcome of the Making Tax Digital. 

This includes measures that simplify the requirements for quarterly updates and remove the need to provide an End of Period Statement. The changes will take effect when MTD for ITSA is introduced in April 2026.