Despite rising anticipation in the press over the last week or two, today’s Autumn Statement appears to have delivered very little of note for our clients and their advisers, as Jeremy Hunt and Rishi Sunak avoided the temptation to please voters with any significant changes, such as the abolition of inheritance tax or cutting of income tax rates.
Instead, the Chancellor elected for a ‘tax giveaway’ aimed at the working population, with a reduction in the headline rate of National Insurance (“NI”) for both Employees and the Self-Employed. The existing rate of 12% for Class 1 NI, payable by employees on their employment earnings between £12,570 and £50,270, will be reduced to 10% with effect from 6 January 2024. For self-employed individuals and partners in trading partnerships, the changes will take effect from 6 April 2024, when Class 2 NI (currently, £3.45 per week) will be abolished while Class 4 NI will be reduced from 9% to 8% on taxable profits between £12,570 and £50,270. For both employees, partners and self-employed individuals, the NI will still be calculated as 2% on earnings / profits exceeding £50,270.
Perhaps of more relevance to our clients, Jeremy Hunt acknowledged the need to fund HMRC further in order to provide them with the resources needed to collect the taxes being due. It is no secret that HMRC is currently over-stretched, with processing of basic documentation, include relief claims and repayment claims, taking more than a year at times. Indeed, earlier this year, HMRC closed its Self-Assessment helpline to re-direct its resources elsewhere.
The Autumn Statement promised an investment of £163 million by the Government to help improve HMRC’s debt management. We are also aware of HMRC’s focus on recovering outstanding tax through the launch of concerted campaigns for taxpayers to correct their filing position. Recently two new campaigns have been launched, whereby HMRC are contacting all taxpayers who claimed either a foreign tax credit or to be non-resident on their 2021/22 tax return, with a view to recovering tax from any taxpayers who have incorrectly assessed their tax position.
If you receive one of these letters do not panic, but we do recommend taking the opportunity to review your affairs to ensure that no detail has been omitted from your return.
If you would like to discuss any of the above or have received a letter from HMRC please do not hesitate to contact Sian Armitage.