More cuts to National Insurance but still no news on expected EOT changes
Today the Chancellor announced the Spring Budget. There were no big surprises with further cuts announced as expected. A summary of the key points affecting our clients are below.
National insurance
Continuing the downward trend announced in Autumn 2023 the Chancellor has announced a further 2p cut down from 10% to 8% with effect from 6th April 2024.
For lower paid employees in particular this will make income tax free bonuses payable by EOTs more attractive as these are subject to national insurance only (not income tax).
The self-employed National Insurance rate is also being cut by a further 2p on top of the already announced 1p cut. As previously announced class 2 NICs for the self-employed is being abolished.
Current UK-Non-Domicile tax regime to be replaced
As expected the Government has announced it will abolish the current tax regime for non-UK domiciled individuals (also known as non-doms).
The main change effective from April 2025 is that anyone who has been a UK tax resident for more than four years will pay UK tax on any foreign income and gains irrespective of domicile.
This could impact companies that have overseas shareholders and directors particularly those who are internationally mobile.
No update for Employee Ownership Trusts (EOTs)
The Government consultation on EOTs which closed in September 2023 and has had some recent press coverage (The Times article) still has had no formal announcements on those speculated changes. In particular:
- Banning the use of offshore trusts for EOTs
- Requiring former owners to relinquish control of their now employee owned business
In general we would be supportive of such changes which reflect current best practice in the industry.
We will keep you informed of developments in relation to this.