On 30 October 2024, Chancellor of the Exchequer Rachel Reeves delivered her Autumn Budget speech, outlining the government’s plans to restore economic stability and strengthen the foundations of essential public services. Below are the key policy measures that will impact employers and individuals.

• Income Tax and Employee National Insurance Contributions (NIC) Rates: There will be no changes to income tax or employee NIC contribution rates until 2028 when adjustments will be made in line with inflation.
• Employer NIC Changes: From 6 April 2025:
• The employer's NIC contribution rate (Secondary Class 1, Class 1A, and Class 1B) will rise from 13.8% to 15%.
• The secondary earnings threshold will decrease from £9,100 to £5,000 per year, with future adjustments aligned with inflation.
• The annual employment allowance will increase from £5,000 to £10,500, removing previous eligibility requirements.
• Employer NIC relief for hiring veterans will be extended until April 2026.
• Mandatory Payrolling of Benefits in Kind (BIKs): Starting April 2026, employers must report and pay tax on BIKs in real-time, excluding beneficial loans and employer-provided living accommodations, which can be payrolled voluntarily. An end-of-year adjustment process will be implemented for benefits whose values are uncertain during the tax year. Further updates and draft legislation will be published in 2025 for technical comments.
• NIC Rates Adjustment: From April 2025, NIC thresholds, including the Lower Earnings Limit (LEL) and Small Profits Threshold (SPT), will increase by 1.7% based on the September 2024 CPI. Voluntary Class 2 and Class 3 NIC rates will also increase accordingly.
• The LEL will be £6,500 per annum (£125 per week) and the SPT will be £6,845 per annum.
• The main Class 2 rate will be £3.50 per week, and the Class 3 rate will be £17.75 per week.
• Van and Car Benefit Charges: The van benefit charge, and the car and van fuel benefit charges will increase using the September 2024 Consumer Prices Index (CPI). The following new rates will come into effect from 6 April 2025:
• Van benefit charge will increase to £4,020.
• Van fuel benefit charge will increase to £769.
• The car fuel benefit charge multiplier will increase to £28,200.

The government will introduce legislation by statutory instrument in December 2024 to ensure the changes are reflected in tax codes for the tax year 2025 to 2026.

• Official Interest Rate (ORI):  Starting 6 April 2025, the official rate of interest used to calculate tax liabilities on employment-related beneficial loans and living accommodations will move from an annual review to a quarterly one.
• National Living Wage (NLW) and National Minimum Wage (NMW): Effective 1 April 2025, wage rates will increase as follows:
• £12.21 per hour for those aged 21 and above.
• £10.00 for ages 18-20.
• £7.55 for ages 16-17 and apprentices.
• The accommodation offset will also increase from £9.99 to £10.66 per day / from £69.93 to £74.62 per week.
• Addressing Umbrella Company Tax Non-Compliance: To close the tax gap and promote fairness, the Government will shift PAYE responsibility in labour supply chains. When an umbrella company is used, the recruitment agency, rather than the umbrella company, will be responsible for accounting for PAYE. If there’s no agency, the end client will take on this role. Full details and draft legislation will be released in the coming months, with the measure set to take effect in April 2026, as part of Finance Bill 2025.
• New Residence-Based Tax Regime and Overseas Workday Relief Adjustments: From 6 April 2025, the remittance basis will be abolished and replaced by a residence-based system and non-UK domiciled individuals can opt into this new residence-based tax regime, allowing them to avoid UK tax on foreign income and gains for their first four years of UK tax residence. Additionally, Overseas Workday Relief will continue with modifications: it will now apply over a four-year period without the requirement to keep the income offshore, with annual claims capped at the lower of £300,000 or 30% of the employee's net employment income.
• Late Payment Interest Rate Increase: Starting 6 April 2025, HMRC will increase late payment interest on unpaid tax liabilities by 1.5 percentage points.
• Closing Loopholes in Car Ownership Schemes: The government will introduce draft legislation to close loopholes in car ownership schemes where employers or third parties sell cars to employees under favourable loan terms and then repurchase them. This arrangement allows some to avoid paying company car tax. The new rules, aimed at ensuring tax fairness, will take effect from 6 April 2026.
• Charity Tax Rules Reform: From April 2026, measures will be introduced to curb tax relief abuse, ensuring only legitimate claims are honoured.
• Statutory Neonatal Care Pay Tax Treatment: Statutory Neonatal Care Pay will be treated as a taxable social security benefit. The Neonatal Care (Leave and Pay) Act 2023 allows parents to take paid leave for babies requiring specialized care. This measure will take effect after the Royal Assent to the Finance Bill 2024-2025.
• Share Incentive Plan: Employers must give employees notice about salary deductions related to Share Incentive Plans (SIPs) due to the introduction of Statutory Neonatal Care Pay starting April 2025. SIPs are tax-advantaged schemes that allow employees to purchase or receive shares, with salary reductions of up to £1,800 per year or 10% of salary. The Finance Bill 2024-25 will amend existing regulations to require employers to include Statutory Neonatal Care Pay in their notifications about SIP deductions.
• Employee Ownership Trusts and Employee Benefit Trusts: The Finance Bill 2024-25 will introduce amendments to section 312C of the Income Tax (Earnings and Pensions) Act 2003. These changes will allow for the exclusion of directors from the 'participation requirement' when determining eligibility for Income Tax relief on annual bonus payments made to employees of companies owned by an Employee Ownership Trust.

Click here to view the Autumn Budget 2024 and here to view the overview of tax legislation and rates.