National Living Wage (NLW)
From 1 April 2024, the National Living Wage (NLW) will increase from £10.42 to £11.44 an hour. Eligibility for the NLW will also be extended by reducing the age threshold from 23 to 21. Young people and apprentices on the National Minimum Wage (NMW) will also see a boost to their wages.
This means a full-time worker aged 23 on NLW will receive an increase of £1,800 a year. A full-time worker aged 21 will receive an increase of £2,300 a year.
This will add significantly to the employment cost burden of those businesses that employ younger or less well paid workers effective from April 2024.
State Retirement Pension
The government honoured the ‘triple lock’ commitment by increasing the New State Pension by 8.5% to £221.20 per week with effect from 6 April 2024.
The Old State Pension, paid to those who reached state pension age before 6 April 2016, will also increase by 8.5% to £169.50 per week with effect from 6 April 2024.
A consultation has been launched today with the aim to tackle the long-standing problem of ‘small pot’ pensions and is launching a call for evidence on a lifetime provider model. This would allow individuals to have contributions paid into their existing pension scheme when they change employer, providing greater control and flexibility over their pension.
This could add considerably to the burden of payroll administration for employers. More information will be published in due course.
The government is freezing the Individual Savings Account (£20,000), Junior Individual Savings Account (£9,000), Lifetime Individual Savings Account (£5,000 including government bonus) and Child Trust Fund (£9,000) limits at their current levels for 2024-25.
This will disappoint many savers as it was expected that the ISA allowance would be increased.
Incidentally, there were no changes to the personal savings allowance.
Expanding the Income Tax Cash Basis
This measure changes the rules for the income tax basis for self-employed individuals and for trading partnerships of individuals.
The cash basis will be set as the default method of calculating taxable profits, with an opt-out for accruals, reversing the current position. The restrictions in terms of turnover are removed so that qualifying businesses of any size can use the cash basis.
The current restriction on deduction for interest costs is removed, as long as the underlying ‘wholly and exclusively for the purposes of the trade’ conditions are met. Loss relief restrictions are also removed, aligning the treatment of losses with those under the accruals basis.
These changes mean the cash basis will be much more attractive to a large number of taxpayers.