On the 30th of October 2024 the new Labour government announced its hotly anticipated first budget. For weeks we have been told about a £22 billion black hole, which was contested from some sides but we finally got to see the details. Amongst many new policies there were some important changes for self-employed people which we have outlined below:
- Personal tax allowance frozen at £12,570 until 2028 and then increasing. Although criticised by Labour when the conservatives introduced the freeze, Labour have continued with the scheme dubbed ‘stealth tax’. With the tax-free threshold not rising in line with inflation, this effectively results in lower earning taxpayers being pulled into paying tax or middle earning taxpayers being pulled into the higher rate.
- Fuel duty – Positive news, especially for delivery drivers, although many thought she wouldn’t, Rachel Reeves kept the freeze on fuel duty for another year whilst also maintaining the temporary additional 5p cut for another year.
- Employer National Insurance Contributions (NICs) – Although Employer NICs is not chargeable on self-employed contracts, the changes could still have an implication for individuals who freelance or own their own business.
From April 2025, the employer NIC rate will increase from 13.8% to 15%, and the employee earnings threshold will decrease from £9100 to £5000. Any freelancer looking to expand and take on staff will need to consider this, but will be thankful to hear the Employment allowance on employer NIC will increase from £5000 to £10,500 per annum.
- Capital gains tax increases – There was a lot speculation on capital gains tax rise, and as expected, the rises were announced. From April 2025, the lower rate capital gains tax rate increased from 10% to 18% and the higher rate will rise from 20% to 24%. Both sides will argue with one saying it will discourage investment, and force investors to hold before selling any assets, whereas the other side will say it was necessary.
- Stamp Duty – For any looking to buy a second home, or current landlords, the news that stamp duty will increase from 3% to 5% will not be welcome.
- Dividend tax rates and thresholds – These are top stay the same, with the tax-free amount staying as £500.
There were many more announcements within the budget, with an increase of the national minimum wage to £12.21 p/h, an increase in the carers allowance threshold, VAT applied to private school fees, changes in high income child benefit charges, and finally a redeclared commitment to move the self-employed reporting of income to digitally.
If you would like to speak to an adviser about the changes, and how they may affect your personally, please request a call using info@shieldaccountancy.co.uk.