Employment tax update - January 2024

11 January 2024

HMRC have released their December Agent Update (Issue 115).

This bulletin follows the release of the December Agent Update (Issue 115). This month the content most relevant to employment taxes and reward activities includes:

Digital or electronic signatures

  • HRMC now accept digital or electronic signatures on forms 64-8, P87 and R40.
  • This includes scanned copies of signed forms and signatures signed on the screen of a digital device or displayed in a keyboard-typed font.
  • To be valid, the taxpayer must have provided the signature themselves.

National Insurance contributions (NICs) rate changes 2024

  • As set out in our previous Employment tax update, the rates of Class 1 Primary, 2 and 4 NICs are changing.
  • From 6 January 2024, the Class 1 Primary NIC rate reduced from 12% to 10%.
  • From 6 April 2024, the Class 2 NICs will no longer be required to be paid by self-employed individuals, and the rate of Class 4 NICs is reducing from 9% to 8%.
  • Employers should ensure that their payroll teams/providers have made updates to account for the changes to the Class 1 Primary NIC rate ahead of the January payroll. If changes to payroll processes cannot be implemented in time, and NICs are overcharged, the normal guidance on correcting payroll errors should be followed.
  • The changes affecting self-employed taxpayers will be accounted for in self-assessment returns due by 31 January 2026.

Off-payroll working rules (IR35) — opportunity to pause settlement

  • Following the announcement in the Autumn Statement, HMRC have outlined how any tax liability arising as a result of HMRC deeming a worker to be an employee will be able to be "set off" against taxes which the worker or their intermediary have already paid. 
  • The policy will apply to income tax and National Insurance contributions (NICs) which HMRC assess on or after 6 April 2024, in respect of payments made since 6 April 2017.
  • Organisations with open off-payroll compliance checks may have the opportunity to pause the settlement of any outstanding liabilities until after April, however, to prevent interest accruing on the liability, such organisations may wish to make a payment on account.

Guidelines for compliance — help to comply with the reformed off-payroll working rules (IR35)

  • HMRC have published their new guidelines for compliance with IR35.
  • The guidelines set out practical steps for agents and clients to follow and include examples of what HMRC considered to be best practice and of good systems and processes that can be implemented to help deal with off-payroll workers.