UK: The Implications Of The Autumn Statement For Employers And Employees

Chancellor of the Exchequer, Jeremy Hunt, presented his Autumn Statement in the House of Commons to Parliament on 22^nd November 2023.

In a recent article, experts from our Corporate and Employment teams reflected on what the Autumn Statements means for businesses in the UK.

Nick Hobden, Partner and Head of the Employment Team commented:

"With inflation much lower than forecast, higher tax receipts and growth in the economy better than forecast, Chancellor Jeremy Hunt has used his Autumn Statement to give back more money to hard working employees and the self-employed."

"He has introduced from 06^th January 2024, a 2% cut in employee national insurance contributions for those employees earning between £12,570 to £50,270 per annum. This will represent an average saving of £415 per annum for those on a salary of £35,000 per annum."

"Employees will also have an opportunity to request that their employers pay pension contributions into a scheme of their choice rather than into a company scheme, which means that they can carry with them to each employment in their career their own pension fund which they want to grow."

Pensions and the Autumn Statement

The pension reforms are being referred to are the "lifetime provider model" and a "pot for life". They concern defined contribution pension schemes only, which the majority of private sector employers offer, as opposed to defined benefit schemes.

The proposals arise from concerns about individuals having multiple small pension pots, having moved employers and been auto-enrolled into different pension schemes with each job. It can be difficult to keep track of all pots and lots of small pots may generate less investment returns compared to one large pot.

Under this model individuals would be able to ask a new employer to pay pension contributions into their existing pension scheme, to avoid building up numerous small pots.

The next step is that the Government will call for evidence from employers, workers' groups and the pensions industry, to assess how this proposal could work.

What is the latest in regards to off-payroll working (IR35)?

Where a business wrongly determines that an individual is not a deemed employee under the off-payroll working rules (commonly referred to as IR35), HMRC can pursue the business for the income tax and NICs it should have deducted at source.

There is no 'set-off' for any income tax that the individual or intermediary has already paid direct to HMRC. This leads to HMRC collecting more tax than was due.

It was announced in the Autumn statement that such a set-off mechanism will be introduced, with effect from 6 April 2024. This could reduce the tax liabilities that an organisation will face if it incorrectly deems that the off-payroll working rules do not apply to its arrangements with individual consultants or contractors. Although this will be dependent upon how much tax the individual or intermediary has actually paid.

Employers should remain vigilant about arrangements with self-employed contractors / consultants. As there will still be employer NICs, interest and penalties to consider if the arrangements are deemed to be disguised employment.

Increases to the national minimum wage

The Government also announced that it would be accepting the Low Pay Commission's recommendations on minimum wage rates. The increased rates will apply from 1 April 2024.

These changes comprise increases to each band of minimum wage, as follows:

Note that 21 and 22 year olds no longer have their own band, but will now fall within the top band.

These increases will be the largest ever increase in the minimum wage in cash terms and is the first increase made to main band of the minimum wage by more than £1.

Employers will need to review their pay bands. Not just of those whose pay has to increase to stay compliant, but also the pay of those on the next band up, to consider what level differential needs to be remain in order to remain competitive in the recruitment market.

The Low Pay Commission has projected that implementing these recommendations will result in the Government achieving the target first set in 2019, being that the national living wage will be equal to two-thirds of median hourly rates pay for those aged 21 and over. The Low Pay Commission cite the strong youth labour market as the rationale for large increases to the minimum wage rates of younger workers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.