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Last week UK‘s Chancellor Philip Hammond delivered  the Autumn Statement and announced that austerity is coming to an end. In this Right Accounts blog post we list the key messages and also review points that are of importance to small business owners.

Class 2 and Class 4 National Insurance contributions

Important information for the self-employed!

• Reforms that were planned for the Class 2 and Class 4 National Insurance contributions have now been officially canceled.
• If you are self-employed, you will continue to pay Class 2 and Class 4 National Insurance contributions.
• Class 2 contributions are £3.00 per week. If your profit is below the threshold of £6,365, you can choose if to pay Class 2 contributions voluntarily.

Class 1 Thresholds

Thresholds for 2019/2020 will be:

• lower earnings limit – £118 per week
• the primary and secondary threshold – £166 per week
• the upper earnings limit – £962 per week
• the upper secondary threshold for under 21s and the apprentice upper secondary threshold – £962 per week

Class 1A National Insurance contributions

From April 2020 these Class 1A changes will be introduced:

• the introduction of a Class 1A (employer-only) charge on termination payments in excess of £30,000
• the introduction of a Class 1A (employer-only) charge on sporting testimonials in excess of the £100,000 exemption

Voluntary Class 3 National Insurance contributions

• The rate of voluntary Class 3 contributions – £15.00 per week.

Employment allowance

• From 2020 access to the National Insurance Employment Allowance to smaller businesses will be restricted. It will only be available to employers with a National Insurance bill in the previous tax year of £100,000 or less.
• The allowance reduces employers' Class 1 National Insurance contributions each time they run the payroll by up to £3,000 per year.

VAT threshold remains the same

Chancellor put an end to discussions about lowering VAT threshold again. He announced that the current threshold which is £85,000 will be kept the same for a further two years.

Personal allowance increase

From April 2019:

• the basic rate tax threshold will increase from £11,850 to £12,500
• the higher rate will increase from £46,350 to £50,000

The threshold will remain at the same level in 2020-2021.

Business rates relief

The business rates will be cut by a third for small retailers with a rateable value of £51,000 or less. The business rates relief amounts to £900 m.

IR35 rules in the private sector

IR35 in the private sector is brought in line with the rules that currently apply for the public sector contracts. Now medium and large businesses will become responsible for assessing contractor’s employment status.

There will be an exemption for the small businesses, however there is still no definition of what will count as the “small business”.

In order to determine the status of the individual, CEST (Check Employment Status for Tax) tool will be continued to use.