The Spring Budget 2023 and Autumn Budget introduced several significant changes that contractors must be aware of. This article will provide a comprehensive overview of the announced key changes, including tax rate adjustments, thresholds, and regulations that may impact your contracting business. Let's delve into the details.
National Living Wage and National Minimum Wage:
The National Living Wage and National Minimum Wage will increase from April 1st, 2023.
Rates for different age groups are as follows:
- Apprentices: £5.28 per hour
- 16-17-year-olds: £5.28 per hour
- 18-20-year-olds: £7.49 per hour
- 21-22-year-olds: £10.18 per hour
- 23 years old and over: £10.42 per hour
- Class 2 NICs will increase to £3.45 per week from April 2023.
- Class 3 NICs will increase to £17.45 per week from April 2023.
Company Cars and Fuel
- Tax rates for company cars will remain frozen until 2024/25.
- Fuel duty will be frozen, extending the 5p cut on petrol and diesel for another 12 months.
The dividend allowance will be reduced from £2,000 to £1,000 starting in April 2023.
From April 2024, the dividend allowance will further decrease to £500.
Dividends will be taxed at the following rates:
- Basic rate: 8.75%
- Upper rate: 33.75%
- Additional rate: 39.35%
Changes to pension tax regulations will come into effect from April 6th, 2023.
- Ensuring no one faces a Lifetime Allowance charge.
- Changing the taxation of certain lump sum benefits to an individual's marginal tax rate.
- Increasing the Annual Allowance from £40,000 to £60,000.
- The Corporation Tax rate will remain at 19% for the financial year 2023-24.
- From 1 April 2024, the Corporation Tax rate will increase to 25% for companies with profits of over £250,000.
- Small companies with profits of £50,000 or less will continue to pay Corporation Tax at a rate of 19%.
- Companies with profits between £50,000 and £250,000 will pay a tapered rate, which will increase from 19% to 25% as profits increase from £50,000 to £250,000.
Making Tax Digital (MTD)
- MTD for Income Tax Self-Assessment (ITSA) has been paused until April 2026.
- From April 2026, businesses, self-employed professionals, and landlords with income over £50,000 will be required to join.
- A review will assess how the MTD for ITSA service can better meet the needs of SMEs.
Simplification Measures to Tax System
The government is introducing simplification measures to the tax system for smaller-sized businesses.
- Allowing tax agents to payroll benefits in kind on behalf of clients.
- Simplifications to customs import and export processes.
- Further reforms may follow after consultations are complete.
- Working parents will have access to 30 hours of free childcare per week for 38 weeks of the year.
- Eligibility and availability stages are as follows:
- From April 2024: All working parents of two-year-olds will be eligible for 15 hours per week.
- From September 2024: All working parents with children aged nine months up to three years old can access 15 hours per week.
- From September 2025: All working parents with children aged nine months up to three years old can access 30 hours per week.
The Spring Budget 2023 and Autumn Budget brought significant changes for contractors, including alterations to tax rates, thresholds, and regulations. Contractors must stay informed and adapt their financial strategies accordingly. To fully understand the implications of these changes and receive personalized