Employment tax update - February 2024

This bulletin follows the release of the January Agent Update (Issue 116). This month the content most relevant to employment taxes and reward activities includes:

Changes to Scottish income tax from 6 April 2024

• The Scottish Government has recently announced further changes to Scottish income tax rates/bands.
• A new tax band called the Advanced Rate will be introduced from 6 April 2024 which imposes a tax rate of 45% on income from £75,000 to £125,140.
• This new band fits between the Scottish Higher Rate (currently charged at 42% on income from £43,663 to £125,140) and the Top Rate (currently charged at 47% on income over £125,140, but due to increase to a rate of 48% from 6 April 2024).

Upcoming changes to Paternity Leave and Pay

• The Government is making changes to the way Paternity Leave and Paternity Pay can be claimed, with the intention of making it more flexible for fathers/partners to access.
• The proposed changes will come into effect from 8 March 2024 and will:
  • allow leave to be taken in non-consecutive blocks;
  • allow leave/pay to be taken at any point in the first year following the birth/adoption of the father/partner’s child; and
  • shorten the notice period that is required to be given to employers for each period of leave to four weeks.
• Further information on transition periods for PAYE software and guidance for employers can be found in the January Agent Update.

New National Insurance tool for employees

• The main Class 1 employee National Insurance Contribution (NIC) rate was reduced from 12% to 10% from 6 January 2024.
• To assist employees in working out their potential NIC liability, HMRC have launched a new tool that estimates the impact the reduction in the main Class 1 NIC rate will have on taxpayers.
• Further information on the main Class 1 NIC rate can be found on the Government website.

Employment tax simplification update

• HMRC are planning to simplify how employees can claim tax relief on expenses by introducing a new online service where expenses can be claimed all in one place. Further details on this simplification measure will be provided later in the year.
• From April 2026, payrolling Benefits in Kind will be mandatory for all employers (i.e. any income tax and NICs arising on benefits provided to employee must be reported and paid through payroll software), meaning Forms P11D will no longer be required.

Convention on Social Security Coordination

• Individuals moving between the UK and Iceland, Liechtenstein, or Norway can now benefit from the new Convention on Social Security Coordination that came into force on 1 January 2024.
• The Convention supports business and trade by protecting the social security position of cross-border workers. This means that employees and their employers, as well as the self-employed, are only liable to pay social security contributions in one country at a time.
• The Convention will also make sure cross-border workers have access to an uprated UK state pension and to reciprocal healthcare arrangements.