More cuts to National Insurance but still no news on expected EOT changes

Spring Budget announcement

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)

As mentioned in our previous blog 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:

  1. Banning the use of offshore trusts for EOTs
  2. 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.

 

Toby Locke, a lawyer and a member of the Postlethwaite Team

If you’re interested in finding out how we can assist with your your Employee Ownership and Share Scheme matters, contact Toby Locke on 02038189420 or at info@postlethwaiteco.com.

Toby Locke, Share Plans Director