The government is reducing the main rate of Class 4 self-employed NICs from 9% to 8%. It is also abolishing Class 2 self-employed NICs for those with earnings of more than £ 6,725.

Those with profits under £ 6,725 will still have to pay Class 2 NIC voluntarily to keep up their contributions record for benefits purposes (e.g. State Pension.)

The government estimates these changes will benefit around 2 million self-employed individuals and result in an average self-employed person on £ 28,200 saving £ 350 in 2024-25. These changes will come into effect from 6 April 2024.

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The government has also announced they will be cutting the main rate of Class 1 employee NICs from 12% to 10%. Unlike the changes to the reduction in the Class 4 NI rate for self-employed workers, these changes will come into effect from 6 January 2024.

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At this year’s Spring Budget, the government announced full expensing to write off the cost of certain capital expenditure incurred by limited companies against taxable profits from 1 April 2023 to 31 March 2026 – it has now been announced that this will be permanent.

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The capital allowance regime allows limited companies to write off the cost of certain capital expenditure against their taxable profits, thus reducing their overall tax bills.

To encourage investment, since 1 April 2023 companies can claim 100% first-year capital allowances on qualifying expenditure on new plant and machinery. This allows full tax relief on expenditure in the year it is incurred. This could include equipment, lorries, computers, and certain fixtures such as kitchen and bathroom fittings, data cabling and alarm systems.

The plant and machinery must be new and unused, must not be a car, given to the company as a gift, or bought to lease to someone else.

For example, £ 500,000 spent on qualifying items would give £ 125,000 off a corporation tax bill for a company paying tax at 25%. The amount of expenditure that can qualify for full expensing is uncapped.

Companies should not forget the Annual Investment Allowance (AIA) of £ 1 million, which was made permanent at that level from 1 April 2023. If the AIA has not already been used against assets which would otherwise only qualify for 50% first year allowances, then it is normally preferable to claim 100% AIA rather than full expensing due to the way proceeds are taxed when the assets are sold.

If you’re a sole trader/partnership or are buying ‘second hand’ equipment, then you’ll still be able to claim 100% capital allowances for the first £1 million spent in a year.