The 2024 Autumn Statement has introduced a series of significant updates to personal tax that will impact a wide range of taxpayers, from the self-employed to pensioners and savers.
In Rebecca Benneyworth Tax Update - January 2024 Rebecca went through the changes.
One of the most notable changes is the reduction to zero of Class 2 National Insurance Contributions (NIC) for the self-employed, which will take effect from the 2024/25 tax year. This means that self-employed individuals with profits above £12,570 will no longer be required to pay this tax, while those with very low profits can still make voluntary contributions to protect their pension rights at an increased rate of £3.70.
In addition to the changes of Class 2 NIC, there will be reductions in other NIC rates. The main rate of Class 4 NIC will be reduced to 8% starting in April 2024, and the main rate of Class 1 primary contributions will drop to 10% from 6 January 2024, although the lower rate of 2% on income above £50,270 remains unchanged. Employers will not see any change to secondary contributions, as these will stay the same.
Another significant development is the abolishment of the lifetime allowance for pensions. From April 2023, the lifetime allowance tax charge will be removed, and the concept of a lifetime allowance will be completely phased out. New legislation will provide clarity on the tax treatment of lump sums, how protection elections will be affected, and the relevance of Benefit Crystallisation Events.
For those who benefit from company cars and vans, the Autumn Statement brings a freeze on van and fuel benefits, with car benefits remaining the same as announced in the previous year, except for electric cars. Savers will also see some changes, as all ISA and Junior ISA limits have been frozen. However, there will be a move towards digitising ISA administration, which will affect providers and permit multiple subscriptions to ISAs of the same type within a tax year from 6 April 2024. Additionally, transfers between providers will be allowed from April 2024.
Making Tax Digital (ITSA) has also been updated to simplify the process of correcting errors by making quarterly updates cumulative and abolishing the End of Period Statement[1:8]. These changes are designed to reduce complexity and streamline the tax filing process. There are also specific carve-outs for foster carers and provisions allowing multiple agents to act for a taxpayer for a single tax account. The mandation threshold for gross income under Making Tax Digital will be kept under review, with the current lower limit at £10,000 and no mandation for gross income under £30,000.
The Autumn Statement reflects a commitment to working with tax agents and software providers to resolve issues and improve the tax system. Early adopters of the new system will benefit from penalty reform, where points will be given instead of penalties for late finalisation, equivalent to a late Self-Assessment return and late payment.
The 2024 Autumn Statement presents a broad array of changes to personal tax that aim to simplify the tax system, provide relief to various groups of taxpayers, and encourage the adoption of digital tax management.
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The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.
