UK Autumn Statement 2023 - Employment

On 22 November, the UK Chancellor of the Exchequer, Jeremy Hunt, delivered the Autumn Statement 2023 with a focus on five areas: reducing debt, cutting tax and rewarding hard work, backing British business, building domestic and sustainable energy and delivering world-class education.

There were minimal announcements from an employment and pensions perspective, with the key ones being as follows:

Abolition of Pensions Lifetime Allowance

Following the announcement at the Spring Budget 2023 that the lifetime allowance charge would be removed from 6 April 2023, the government has confirmed that it will introduce legislation in the Autumn Finance Bill 2023 to complete the work to remove the pensions lifetime allowance, with an effective date of 6 April 2024.

Enterprise Management Incentives (EMI)

As also announced at the Spring Budget 2023, legislation will be introduced in the Autumn Finance Bill 2023 to extend the deadline for a company to notify HMRC of the grant of an EMI option from 92 days following the grant of the option, to 6 July following the end of the tax year. This change will apply to options granted on or after 6 April 2024.

IR35 – Calculation of PAYE Liabilities in Cases of Non-Compliance

Following on from its consultation earlier this year, the government has confirmed that secondary legislation will be introduced to allow deemed employers under the IR35 regime to reduce their PAYE liabilities by reference to the tax and national insurance a worker and their intermediary have already paid where it is determined that they have incorrectly treated such workers as self-employed for the purposes of the IR35 legislation. These changes will take effect from 6 April 2024.

This will be welcome news for businesses and other engagers of personal service companies given the inherent complexities and uncertainties that can arise in the context of assessing the tax employment status of individuals for the purposes of the IR35 regime.

Reduction in Employee Class 1 National Insurance Rate

As widely anticipated, the government will introduce legislation to reduce the main rate of primary/employee class 1 national insurance contributions.  With effect from 6 January 2024 the main rate will reduce by 2%, from 12% to 10%.  Whilst the proposed reforms are perhaps not as broad as many would have hoped, they will nevertheless be welcomed by employees who, in the previous tax year, were paying contributions at the rate of 13.25%.

In a related change, mandatory class 2 national insurance contributions will be abolished for the self-employed and the main rate of class 4 national insurance contributions (also payable by the self-employed) will be reduced by 1%, from 9% to 8%.  Unlike the changes for class 1, these changes will take effect from the start of the next tax year, on 6 April 2024.

Should you have any queries on the Autumn Statement, please reach out to your usual UK tax contact or one of the following:

David Smith, Partner

Richard Johnson, Senior Associate