On Wednesday 15th March 2023, Chancellor Jeremy Hunt announced the details of the Spring Budget, with a focus on getting people back into work and boosting the economy.
Here’s what you need to know as a limited company contractor:
NIC / National Living Wage / National Minimum Wage
As promised in the Autumn Statement, both the National Living Wage and National Minimum Wage will be increased from the 1st of April 2023.
These rates are:
- £5.28 an hour for apprentices
- £5.28 an hour for 16-17-year-olds
- £7.49 an hour for 18-20-years-olds
- £10.18 an hour for 21-22-year-olds
- £10.42 an hour for those 23 years old and over
For 2023/24, the government will increase the Class 2 and Class 3 NICs to £3.45 per week and £17.45 respectively.
Vehicles / Fuel
The rates of tax for company cars are remaining frozen until 2024/25.
Fuel duty has also been frozen so that the 5p cut on petrol and diesel, which was due to end in April, will remain so for another 12 months.
Dividends
As detailed in the Autumn Statement, from April the government will reduce the dividend allowance from £2,000 to £1,000. This will then drop again to £500 from April 2024.
The rates at which dividends are taxed will remain as:
- Basic rate – 8.75%
- Upper rate – 33.75%
- Additional rate – 39.35%
Pension Tax
In a bid to encourage those over 50 to return to work, the government is introducing legislation around pensions.
These will come into effect from the 6th of April 2023 and include measures such as:
- Ensuring nobody will face a Lifetime Allowance charge.
- Changing the taxation of the Lifetime Allowance excess lump sum, serious ill-health lump sum, defined benefits lump sum death benefit, where they are currently subject to a 55% tax charge above the Lifetime Allowance, to taxation at an individual’s marginal rate.
- Increasing the Annual Allowance from £40,000 to £60,000.
Making Tax Digital
Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) has been paused until April 2026. From this date, businesses, self-employed professionals and landlords with income over £50,000 will have to join and then those with income over £30,000 will be mandated from April 2027.
There will also be a review looking at whether the MTD for ITSA service can be shaped to better meet the needs of SMEs.
Simplification Measures to Tax System
SMEs will be pleased to learn that the government is introducing simplification measures to the tax system specifically for smaller sized businesses. The idea behind this is to encourage growth by reducing the amount of time spent on administrative tasks.
These include:
- Changes to IT systems to allow tax agents to payroll benefits in kind on behalf of clients.
- Simplifications to the customs import and export processes.
There may be more reforms to come once consultations are complete.
Childcare
Another way in which the government is trying to get people to get back to work is to focus on childcare issues.
Working parents will be able to access 30 hours of free childcare per week (for 38 weeks of the year) and it will be available from when their child is nine-months-old to when they start school.
However, it will be a while until this is available, and it will be rolled out in the following stages:
- 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 will be able to access 15 hours per week.
- From September 2025 – all working parents with children aged nine months up to three years old will be able to access 30 hours per week.
To find out more about contracting please contact Jaime on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.
