With Covid, several Prime Ministers and Chancellors and the run up to a general election, changes to the tax system have been numerous and we can expect more in 2024.
What can we see on the horizon and how should you react?
This was very much about 'making work pay' and aiming to improve productivity. Important though national insurance tax reductions are to help sole traders and partnerships, they do nothing to help those caught by frozen thresholds or running small limited companies.
With Class 2 national insurance abolished and Class 4 national insurance reduced by 1% from April 2024 but dividend tax unchanged, more businesses may decide to remain as sole traders rather than incorporate or even prefer to disincorporate.
When you add in that the cash basis will become the default way to measure tax profits from April 2024 (for any size sole trader) together with the previously known companies house reforms requiring more company information to be made public, the government clearly wants small businesses to stay as sole traders unless they're large enough to embrace being a limited company in full.
There's been a lot said today, but does it amount to refilling what has been there before or something new? Was there anymore in it than for high earning, beer drinking, car driving, parents with potholes outside their home?
With important tax changes taking place this April, see what action you might take:
Inflation is a gift for the Chancellor when so many tax allowances have been reduced or frozen. As wages increase with inflation, more and more people will get caught by a 40%, 60% or 45% tax rate and many will have to repay child benefit when they didn’t before.
In this environment, the real tax cost of earnings and profits will increase as time goes on. For example, if you’re planning to refurbish your buy-to-let you might save more real income tax by delaying the refurbishment.