Employment tax update - November 2024

This bulletin follows the release of the November Agent Update (Issue 125). This month the content most relevant to employment taxes and reward activities includes:

Mandatory payrolling of benefits from April 2026

• At the Autumn Budget, the Government announced some updates to the January 2024 proposal to mandate the reporting of benefits in kind (BiK) through payroll software from April 2026.
• Following some of the uncertainty around reporting employment-related loans and living accommodation through payroll, it was confirmed that a phased approach would apply, and employers will not be required to payroll these benefits from April 2026. No decision has been made as to when the Government will mandate payrolling of these benefits. 
• Employers will still be able to payroll loans and accommodation through payroll on a voluntary basis from April 2026. However, a modified P11D and P11D(b) will be available to report these two benefits if employers do not wish to payroll them. 
• An end of year process will be introduced to amend the taxable value of any BiKs that cannot be determined during the tax year. However, the expectation is that most benefits will be reported as accurately as possible during the tax year. 
• The requirement to submit P46 (Car) forms will be removed, as functionality will be provided to report the data required through payroll software in real time. 
• HMRC will provide further updates on plans to publish draft legislation and technical specifications. 
• Agents can register their clients’ benefits which will be taxed through payroll from 6 April 2025 onward, but registration must be done before this date. 
• To payroll BiKs online agents will need to opt in to use the “Employer Liabilities and Payments” service. Agents can opt in by selecting “PAYE for employers” in their HMRC online services for agents account. 
• P11Ds must still be submitted for the 2024/25 and 2025/26 tax years for any benefits and expenses that have not been payrolled.

In-year changes to the official rate of interest from 6 April 2025

• The Government confirmed at the Budget that from 6 April 2025 the official rate of interest (ORI), which is used to calculate the income tax charge on the employment-related loans and accommodation benefits, may increase or decrease during the year (rather than the annual refresh that currently applies). 
• The rate will be reviewed on a quarterly basis, and any in-year changes would take effect on 6 July, 6 October and 6 January.  Any future changes to the interest rate will be published on GOV.UK.
• Further information can be found at Autumn Budget 2024 – overview of tax legislation and rates (OOTLAR).

Self-assessment tax returns for student and postgraduate loan borrowers

• Individuals with an outstanding student or postgraduate loan who are completing a self-assessment tax return should include their PAYE income for each employment on their tax return prior to submission to HMRC. 
• This will ensure that charges relating to student or postgraduate loans are correctly calculated based on total income, and that interest is calculated at the correct rate by the Student Loans Company. 
• Student and postgraduate loan deductions taken from each employment must also be included in the tax return. These amounts will automatically be deducted from the total student or postgraduate loan charge in self-assessment, as these deductions have already been sent to the Student Loans Company and applied to the loan balance for the relevant tax year. 
• Further guidance on telling HMRC about a student loan is available on GOV.UK.

Updates to the Guidelines for Compliance

• Guidelines for Compliance are a suite of products for businesses and their advisors that aim to clarify HMRC’s view on complex, widely misunderstood or novel areas of the tax rules. 
• HMRC have recently published new Guidelines for Compliance to help businesses with the apprenticeship levy and employment allowance, specifically in relation to connected entities. 
• The term “entity” in this context includes companies, charities and public bodies (and their related organisations). 
• These guidelines clarify the connected entities rules to help employers correctly report the apprenticeship levy and claim employment allowance by:
  • explaining how the connected entities rules impact the apprenticeship levy and employment allowance;
  • highlighting the common errors employers make;
  • giving practical advice on how to identify connected entities;
  • providing help on the unique scenarios in the public body population; and
  • setting out how employers can correct any errors made.

Tax administration framework review

• The Government has announced the next stages of modernising and reforming HMRC’s tax administration framework:
  • a summary of responses to the spring 2024 call for evidence on HMRC’s enquiry and assessment powers, penalties and safeguards;
  • a consultation on new ways to tackle non-compliance; and
  • an announcement to consult, in spring 2025, on “making better use of third-party data” that builds on the Tax Administration Framework Review (TAFR) information and data call for evidence.
• The consultation on new ways to tackle non-compliance invites views on HMRC’s approach to correcting taxpayer inaccuracies in a claim or return, and whether there are ways this could be improved. 
• Further consultations will follow in spring 2025 on:
  • simplifying and improving HMRC’s use of behavioural penalties;
  • improving access to alternative dispute resolution and statutory review; and
  • modernising HMRC’s approach to acquiring and using third party data to make it easier for taxpayers to get tax right first time.