EMPLOYMENT TAXES
The Requirement to File a Self-Assessment Return
The Government will legislate so that individuals who only have PAYE income do not have to complete a tax return.
Tax Avoidance
Promoters of tax avoidance schemes will be subject to a new criminal offence which will allow HMRC to bring disqualification action against directors of companies involved in promoting tax avoidance.
Construction Industry Scheme (CIS)
The CIS scheme is being reformed regarding the Gross Payment Status (GPS) compliance test. The GPS is where a contractor can pay without a deduction of CIS tax. HMRC have been concerned that this status is used too much and the reforms will include measures to allow HMRC to withdraw this status where fraud is detected.
Income Tax
Many of the personal allowances have been frozen until 2028 which brought people into the tax system for the first time. The Autumn Statement did not announce any let up to this but did confirm that the Blind Person’s Allowance (BPA) and the Married Couple’s Allowance (MCA) will be uprated for 2024/25.
There was no change to the main rates of Income Tax (20%, 40% and 45%) or the thresholds which have also been frozen until 2028, but this must be considered with the fact that powers are shared with Wales and Scotland:
- Wales have the power to vary Income Tax percentages in line with the tax bands that apply in England and Northern Ireland
- Scotland has greater powers to set their own Income Tax rates and bands
So, we must wait until their Budgets on 19 December 2023 to get the complete UK picture.
Company Car and Van Charges
For P11Ds, where a Van Benefit Charge or a Car & Van Fuel Benefit Charge arises (because a vehicle is provided as a benefit by the employer), the rates are frozen for 2024/25 at the current tax year levels.
National Insurance
Perhaps the biggest announcements were regarding National Insurance that applies to employees.
Class 1
From 06 January 2024, the main rate of Class 1 Primary (employee) National Insurance Contributions will reduce from 12% to 10%. This is within the current tax year 2023/24. The following are impacted:
- Employees on NI category letters A, F, H, M and V
- Employees earning between the Primary Threshold and the Upper Earnings Limit
For payments made on and after 06 January 2024, National Insurance for employees will be calculated as follows:
| Band | Standard | Pensioners | Reduced | Deferred
|
| Table Letters | A/F/H/M and V | C/S | B/I | J/L and Z |
| Earnings up to LEL | NIL | NIL | NIL | NIL |
| Earnings between LEL and PT | 0% | NIL | 0% | 0% |
| Earnings between PT and UEL | 10% | NIL | 5.85% | 2% |
| Earnings above UEL | 2% | NIL | 2% | 2% |
There is no reduction in the main percentage that applies to employers.
You are strongly advised to contact your software provider who will have to make this change in software for payments made on and after 06 January 2024.
Class 2
This is the National Insurance that is paid at a weekly flat rate (currently £3.45 per week) by the self-employed with profits above £12,570.
From tax year 2024/25, this is being abolished. But where the profit is above £6,725, contributory benefits, including the State Pension, can still be accessed even though no NI is payable.
Where profits are below £6,725, contributory benefits, including the State Pension, can still be accessed by paying voluntary National Insurance (known as Class 3).
Class 3
This has been frozen in 2024/25 at its 2023/24 level (£17.45 per week).
Class 4
This is the other National Insurance payable by the self-employed where there is a profit (between £12,570 and £50,270). The rate between these thresholds is 9% in 2023/24 and it will reduce to 8% in 2024/25.
National Insurance Contributions Rates and Thresholds
For 2024/25 tax year, all rates and thresholds remain unchanged – remembering that the main rate employees pay has reduced to 10% from 06 January 2024.
Employment Allowance
This is the amount that certain employers can claim from HMRC and use to offset against their National Insurance liability. There was no mention of this in the Autumn Statement or any accompanying documents, therefore, this remains at £5,000 for eligible employers.
Pensions Lifetime Allowance
The pensions lifetime allowance catches those who have diligently saved all their lives and built up a significant pension pot. If that pot exceeds their lifetime allowance of £1.0731m at the time they start to draw their benefits, the excess value is subject to a lifetime allowance tax charge at 25% or 55% if taken as a lump sum. This pensions lifetime allowance charge is scrapped from 6 April 2023 and the lifetime allowance will be abolished completely in a future Finance Bill.