Tag: nic

Employment Tax Briefing – Spring 2024

Posted on by Katie Trower

As the current tax year draws to a close, we look towards April and the challenges which the new year will present.

We are starting to see a rise in HMRC activity, specifically concerning off-payroll working (OPW) arrangements. Whilst we are seeing many decisions announced by the courts on cases concerning TV presenters, there is also an

The Finance Act 2024, which gained Royal Assent in late February, includes the legislation that allows the correct off-set of any ‘other taxes’ against the PAYE Income Tax and National Insurance liabilities due under the off-payroll working legislation (commonly referred to as IR35 or the intermediaries legislation). looks at how the provisions can be applied in resolving disputes with HMRC.

In other news, sadly, the question of termination payments is something we are discussing with clients on a more regular basis. However, HMRC has recently announced it will no longer provide employers with advance assurance on the tax treatment of termination and redundancy payments. My colleague, Dinesh Pancholi, Senior Manager, summarises some of the key points which need to be considered to help ensure payments can be made tax efficient.

In January 2024, the Government announced the mandatory payrolling of benefits in kind (BiK), with effect from April 2026. Employers will need to carefully plan who they will transition over to the new regime and bid farewell to the annual submission of P11D forms. Joanne Hennessy, Senior Manager, provides some initial thoughts on an area which will evolve over the next 24 months.

As part of the Spring Budget 2024, the Chancellor Jeremy Hunt announced a further 2% reduction in employees’ National Insurance contributions (NICs) which will come into effect from April 2024. However, there was no change to the amount of National Insurance (NI) employers will be required to pay, which remains at 13.8%. Employers should consider the use of pension salary sacrifice arrangements both to help promote pensions saving and to help make their salary budgets stretch that bit further. We provide an overview of the key points which need to be considered when putting a pension salary sacrifice arrangement in place.

Finally, we include an employment tax calendar, providing some key reminders for the coming year.

I hope you find the articles of interest. Please do not hesitate to contact me, or any member of the Employment Tax team, should you have any points you wish to raise with us.

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Autumn Statement 2023: National Insurance Contributions

Posted on by Alicia Sprott

National Insurance rate cut

From 6 January 2024, employees earning between £12,570 and £50,270 per annum will pay 10% National Insurance (NI). This is a cut of 2% and means that an average worker, earning £35,400, will receive an additional £450 in their pay packet. Someone in the higher tax bracket of £70,000 will be £750 better off. The Chancellor said: “This will reward work and sustainably grow the economy, providing a combined rate of Income Tax and NICs for an employee paying the basic rate of tax of 30% – the lowest since the 1980s.”

Veteran NIC relief

Employers who hire veterans will receive an additional year of NIC relief. This relief was implemented in April 2021, with qualifying businesses paying zero rate employers’ NIC up to the veteran’s upper secondary threshold, which is currently £50,270. An employee qualifies as a veteran if they have either:

  • Served in the regular armed forces for at least one day
  • Completed at least one day of basic training

The benefit is accessible to any veteran who has begun their first civilian job, regardless of when they left the regular armed forces.

The qualifying period begins on the first day of the veteran’s first civilian employment after leaving the regular armed forces and ends 12 months later.

NIC relief and Investment Zone programmes

Following the 2023 Spring Budget, the Government launched the refocussed Investment Zones programme, which afforded tax and NIC reliefs for qualifying employers. Eligible businesses enjoy a range of ‘tax’ incentives, such as enhanced capital allowances, relief from Stamp Duty and employer NICs for additional employees. To qualify for the NIC relief, the new employee must spend 60% or more of their working time within an Investment Zone tax site. This rate can be applied on all new hires earning up to £25,000 per annum for those employers operating in a Freeport and Investment Zone sites. The relief is available for up to 36 months per employee.

The original incentives period was five years, but this has since been extended to 10 years. New Investment Zones were also announced for the West Midlands, East Midlands, and Greater Manchester, as well as Wrexham and Flintshire.

Further commentary

Although the reduction in employees’ NIC is welcome, it will only partially offset the freezing of the tax/NIC bands. Normally, the personal allowance for Income Tax and the basic rate limit would have increased in April 2024.

A similar increase would have increased the current higher rate barrier to £53,580. The result was a higher tax burden on people who otherwise would not have been taxed.

Using the 4.6% inflation rate, someone on a low income of £20,000 would have seen their pay increase by £185, instead of £149, with the NIC changes.

It should also be noted that with no reduction in the employers NIC, and the imbalance between employee and self-employment NIC rates, it may mean that disguised employment is encouraged.

Additionally, although the NIC reduction in January 2024 is around six weeks away, with Christmas and New Year in between, the implementation may present difficulties for payroll and software providers, resulting in employees receiving incorrect net pay.

Please contact our Employment Tax team should you have any questions.

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