Employment tax update - April 2024

17 April 2024

HMRC have released their March Agent Update (Issue 118).

This month the content most relevant to employment taxes and reward activities includes:

Changes to National Insurance contributions (NIC)

  • Now that we are in the 2024/25 tax year, the NIC changes set out in the Spring Budget have taken effect.
  • As a reminder:
    • the rate of Class 1 employee NIC up to the primary threshold has been cut to 8%;
    • the rate of Class 4 NIC (for self-employed individuals) up to the upper profits limit has been cut to 6%; and
    • (in both cases, the marginal rate remains at 2%).
  • Another NICs change previously announced in the Autumn Statement that took effect from the start of the 2024/25 tax year was the abolition of the requirement to pay Class 2 NICs. Further detail on this change is included in HMRC’s update.

Investment Zone employment tax offer

  • An employer will be able to claim a zero rate of Class 1 employer NIC on the earnings of eligible employees above the annual secondary threshold (£9,100) up to and including the annual upper secondary threshold (£25,000). This applies to employers with a business premises in an Investment Zone special tax site.
  • The NICs relief will be available for all new employees employed between the date the special tax site designation takes effect and the special tax site’s end date.
  • The employee:
    • must be a new hire with an employment start date on or after 6 April 2022 and before the special tax site’s end date; and
    • cannot have worked for that employer (or an employer connected to the employer) in the previous 24 months.
  • At the start of the employee’s employment, it must reasonably be expected that the employee will spend a minimum 60% of their working time in the Investment Zone special tax site. The relief will apply for up to 36 months per eligible employee. 
  • Other non-employment tax/reward related Investment Zone tax incentives include Enhanced Capital Allowances, enhanced Structures and Buildings Allowances, Stamp Duty Land Tax reliefs.
  • You can read more about Investment Zone special tax sites on the Government’s website.

Mandating the payrolling of Benefits in Kind (BiKs)

  • As set out in the Financial Secretary to the Treasury’s tax simplification update on 16 January, the Government is mandating the payrolling of BiKs from April 2026. HMRC are encouraging business to begin payrolling voluntarily in advance of this date.
  • From the 2025/26 tax year agents will be able to register to payroll benefits in kind on behalf of their clients. This is part of HMRC’s plan to modernise and simplify reporting and payment of income tax.
  • Currently Class 1A NICs cannot be settled via payroll meaning a Form P11D(b) must be submitted at the end of each tax year. Going forwards, HMRC anticipate both income tax and Class 1A NICs being reported and paid in real time – this will require changes to existing payroll software.
  • To help businesses to prepare for the transition, new guidance is expected to be provided in advance of April 2026.

Read the full March Agent Update (Issue 118).