Tax Cuts for the Self Employed have figured in the last two budgets. Let’s look at what the tax cuts mean to the self employed entrepreneur.
National Insurance contributions are the chosen vehicle for tax cuts. In the Autumn Statement the government reduced Class 4 NICs from 9% to 8%. In addition they stopped the requirement to pay class 2 NICs. These changes come into effect in April 2024.
Yesterday Jeremy Hunt went on to further reduce Class 4 to NICs from 8% to 6%.
So what does this mean? Class 2 NICs are the method the government has used for the self employed to have entitlement to state pension, employment and support allowance and other contribution based benefits. When self employed profits passed the threshold of £6,725 Class 2 NICs became payable. Added to this self employed with a profit below this threshold could pay voluntarily to gain access to the benefits.
Fortunately, although Class 2 NICS are no longer, the self employed will still to have access to these benefits.
National Insurance: introduction: What National Insurance is for – GOV.UK (www.gov.uk)
Giving a like for like comparison of the deductions for NICs before and after the Autumn and Spring NIC cuts:
So how much extra money in your pocket : almost £700.
If you make a self employed profit of £30,000
Make sure you’re not paying too much tax! Barnowl Bookkeeping is here to help with self assessment, VAT, CIS and payroll. Located near King’s Lynn near to Wisbech, Downham Market, Swaffham, Fakenham and the North Norfolk Coast. Click the link for more information.