Autumn Statement 2023 – employers have little time to prepare

As I listened to the Autumn Statement my first thought was that the Chancellor is closing the gap between employment and self-employment. My second, that employers should be prepared for the added burden that will be placed on them.

Over the coming months there will be a lot to consider in terms of both tax compliance and governance.?

The Chancellor announced various changes to National Insurance Contributions (NICs) for employees and the self-employed in the form of reductions to rates and the requirements to pay contributions. Those changes to NICs will start to reduce the differential between the employed and self-employed.

• The main Class 1 NIC rate for employees will be reduced from 12% to 10% from 6 January 2024, rather than from the start of the following tax year
• For the self-employed and those who pay voluntary NIC, there will be a reduction to the Class 4 NIC rate from 9% to 8%, from 6 April 2024
• The Government will remove the requirement to pay Class 2 NIC for those with profits exceeding ￡6,725 from the same date, whilst protecting entitlement to contributory state benefits

No increases to the NIC thresholds or changes to any other NIC rates were announced for the 2024/25 tax year. I should point out however that such measures are usually reserved for the Budget statement, so something to look out for next year. There are very few working days left till those changes to NIC come into effect, and they will soon be followed by changes to the National Minimum Wage (NMW), more on that later.

There are very few working days left till those changes to NIC come into effect.

Announcements relating to the self-employed did not end there, and confirmation was provided to allow a set-off for taxes already paid by a worker/intermediary against taxes due from a deemed employer in cases of non-compliance with the off-payroll working (IR35) rules. This welcome development should reduce the circumstances where income tax is paid twice, or where off-payroll workers do not end up paying any income tax on income they take from their business.?

Increases to NMW rates will come into effect on 1 April 2024. The National Living Wage rate will rise to ￡11.44 and be extended to those aged 21 and over. While this is welcome news for the lower paid, NMW rules are still complex, and employers should be mindful of existing risks. This adds to the burden to ensure compliance in relation to pay governance as a result of recent developments in relation to the calculation of Holiday Pay. Employers who offer non-cash benefits via salary sacrifice should review their arrangements to ensure they do not inadvertently breach the NMW thresholds.?

Finally, a call for evidence was announced with the intention to eventually simplify the pensions market by enabling individuals to have one pension pot for life. Such a 'lifetime provider model' would represent a significant change to the UK's pension infrastructure, however there are significant hurdles that will likely need to be overcome for it to be a success. Although this isn’t going to come into effect in the next few months, it’s a potential future burden for employers who will have to alter existing policies to stay compliant with new legislation.

To learn more about what the Autumn Statement means for your business, join Hazel Platt , Grant Thornton UK LLP Head of Tax on 29 November, along with a panel of our experts as they discuss planning strategies for 2024.

You can register here: https://www2.grantthornton.co.uk/2023-11-29-webinar-firmwide-6326_registrationpage1.html

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