The Autumn Budget 2024: employment tax update

The Government will increase the rate of employer NICs from 13.8% to 15% from 6 April 2025. Employer NICs are payable on employees’ earnings and benefits in kind. The threshold from which employers become liable to pay NICs on employees’ earnings will reduce from £9,100 to £5,000 from 6 April 2025, and this threshold will increase in line with inflation from 6 April 2028. The effect of this reduction to the threshold will be reduced for small businesses as the Employment Allowance (a deduction from employer NIC bills) will be increased to £10,000 when the reduction takes place.

Income tax thresholds will increase in line with inflation from 6 April 2028.

It has been confirmed that, from April 2026, it will be mandatory for all employers to payroll all benefits in kind except for employment related loans and accommodation. Payrolling for these two benefits will be introduced on a voluntary basis, also from April 2026, and the Government will set out the next steps on when they will be mandated in due course.

Employers will no longer be required to obtain advance approval from HMRC for a direction to operate PAYE on the proportion of an employee’s employment income for work carried out in the UK (this is generally relevant for employees of UK companies who are not UK tax resident or who are eligible for overseas workday relief).

As expected, it was announced that both the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) schemes would be extended to 2035, enabling tax reliefs to continue to be available to individuals who invest in small and medium sized companies meeting the relevant criteria.

The Government has confirmed that the non-dom regime - and the remittance basis of taxation - will be abolished from 6 April 2025, and replaced by a new Foreign Income and Gains (FIG) regime. Qualifying individuals who opt-in to the FIG regime will not pay UK tax on certain categories of foreign income and gains for their first four years of UK tax residence.

You can read commentary from our private client team on this topic. 

The following points are of relevance to internationally mobile individuals.

• Reform of Overseas Workday Relief (OWR) was also announced with the relief being extended to a four-year period to align with the new FIG regime. Claims for OWR will be subject to an annual limit of the lower of £300,000 or 30% of the employee’s net employment income and requirements for the relevant income to be kept offshore will be removed.
• The introduction of a new Temporary Repatriation Facility (TRF) was also confirmed with the TRF being available for three tax years starting from the 2025/26 tax year. This will enable individuals who have previously claimed the remittance basis to designate income and gains to be subject to a TRF charge, with there being no further tax charge if the designated income or gains are then remitted to the UK.  For the first two tax years, the applicable tax rate will be 12% and in the third tax year the tax rate will be 15%.

The Government will introduce new legislation to make agencies responsible for PAYE on payments made to workers that are supplied using umbrella companies (no draft legislation is available). This will take effect from April 2026. 

Several changes to the rules that apply to Employee Ownership Trusts (EOTs) and Employee Benefit Trusts (EBTs) were announced at the Budget.

In relation to EOTs, changes were announced which will bring into force:

• new restrictions on former owners from retaining control of companies following the sale to an EOT.
• a requirement for trustees to be UK resident.
• a requirement for trustees to ensure that consideration paid for company shares does not exceed market value.
• changes to the clawback period during which tax relief can be clawed back from sellers if EOT conditions are breached post sale.
• additional reporting requirements to claim CGT relief.
• clarification on the income tax relief available for costs associated with setting up EOTs (including the acquisition costs); and
• a new exclusion for directors to meet the “participation requirement” for determining whether income tax relief is available on annual bonus payments made to EOT-owned companies.

These changes will have effect for all disposals made to trustees of an EOT on or after 30 October 2024.

In relation to EBTs, changes were announced which will:

• ensure that restrictions on connected persons benefitting from an EBT must apply for the lifetime of the trust;
• restrict the IHT exemption to circumstances in which shares have been held for two years prior to settlement into an EBT; and
• ensure that no more than 25% of employees who can receive income payments from the EBT should be connected to participators in order for the EBT to benefit from favourable tax treatment.

These changes took effect from 30 October 2024.