NEW Articles27 Aug 2024
The Advantages of the UK as a Location for a Holding Company
The UK is still an attractive location to site an international holding company
Articles
Self-employed workers will see a substantial reduction in their Class 4 national insurance contributions (NICs) for the current tax year after two percentage cuts were announced in the 2023 Autumn Statement and 2024 March Budget.
Maximum saving
Class 4 NICs are earnings-related with the main rate paid on profits between £12,570 and £50,270. For 2023/24, the main rate was 9%, but for 2024/25, it is reduced to 6% – representing a maximum saving of £1,131. Add to that:
The additional rate of Class 4 NICs on profits in excess of £50,270 is 2% and this rate is unchanged from 2023/24.
However, there can be less tax saving for business investment for 2024/25. Buying a new laptop for £1,500, for example, would have saved a basic rate taxpayer £435 last year, but the tax saving is now £390.
Lower profits
Those who are self-employed with profits of less than £50,270 will see the following reductions to their total NIC liability:
Profit | 2024/25 NICs | Reduction |
£15,000 | £146 | £232 |
£25,000 | £746 | £552 |
£35,000 | £1,346 | £852 |
£45,000 | £1,946 | £1,152 |
Tax thresholds
NICs cannot, of course, be considered in isolation. The personal allowance and basic rate income tax thresholds remain frozen at 2021 levels with the NIC reductions insufficient to offset fiscal drag.
However, for Class 4 NIC purposes, it has been beneficial to have the main rate threshold frozen at £50,270. If it had been increased to, for example, £60,000, the self-employed would be paying 6% – rather than the 2% additional rate – on a further £9,730 of profits.
A House of Commons explainer on fiscal drag gives a summary of the points here.
The 2024 Budget factsheet explaining the changes can be found here.
THE AUTHOR
Partner, Personal Tax
More & Other Musings
View all related contentNEW Articles27 Aug 2024
The UK is still an attractive location to site an international holding company
News12 Aug 2024
An iconic rooftop bar in central London and lots of friendly faces, the fabulous setting of the summer party hosted by Westminster Business Council
Articles5 Aug 2024
Starting from January 1st, 2025, private schools in the UK will be required to apply a VAT rate of 20% on both school and boarding fees. According to HMRC Business Brief 08(2024), any fees that are invoiced or paid after... Read more
News5 Aug 2024
This Summer we enjoyed some fun events organised by our SAT team
Guides & Publications2 Aug 2024
In this edition of Alliotts Focus we look at; Adjusted net income, Capital Gains Tax, Cash basis options, and the outcomes from the general election