In March 2024, we saw Chancellor of the Exchequer Jeremy Hunt deliver the U.K. spring budget, which was rumoured to be the final fiscal statement prior to the general election scheduled later this year.
Rumours of significant tax cuts began circulating days before the spring budget was announced. However, as the day drew ever closer, it seemed increasingly likely that more changes to National Insurance (NI) (following initial changes already announced at the autumn statement in 2023) would be the budget’s headline announcement.
The chancellor covered different areas, many of which didn’t have direct implications for the payroll profession. However, there were certainly a few significant announcements that piqued the interest of payroll professionals that included the following:
More NI Changes
Rumours swirled on the day of the budget that there would be a cut to the employee main rate of NI of 2%, taking it from 10% to 8%. This followed the decrease from 12% to 10% we saw from 6 January 2024. This change was confirmed within the chancellor’s speech, along with the news that this would be implemented from 6 April 2024, to align with the start of the new 2024-2025 tax year.
This additional NI change did not allow software developers or payroll professionals much time to make the necessary changes to systems and to test those changes, and the news came at a time when the profession was particularly busy preparing for year-end. It’s of note that, when Chartered Institute of Payroll Professionals (CIPP) staff attended HM Revenue and Customs’ (HMRC’s) Stakeholder Conference in February 2024, Jim Harra, HMRC’s chief executive and first permanent secretary, specifically thanked software developers and employers for implementing the short notice changes to NI in January 2024. It appears that the payroll industry is being relied upon more and more to accommodate significant changes in shorter timeframes, which subsequently impacts the pay that workers receive.
Tax Administration and Maintenance Day
Some of the things for payroll professionals to be aware of aren’t announced in the chancellor’s speech directly but are contained in the budget’s accompanying documents.
Within the document, it was confirmed that there would be a Tax Administration and Maintenance Day (TAMD) held on 18 April 2024. This day involved the publication of several consultations and calls for evidence, which outlined policy proposals from different government departments. Events like these are always big days for the CIPP’s policy and research team, who liaise with CIPP members and the wider payroll profession to provide feedback to the government directly, on behalf of the industry. A summary of TAMD announcements is now available.
HMRC News
Also within the document was information about HMRC, and where investments will be made to make improvements to services and processes. Some notable announcements included the following:
- £140 million will be invested in improving HMRC’s ability to manage tax debts, to help support individual and business taxpayers out of debt more quickly and to allow HMRC to collect due taxes
- HMRC’s digital services will be simplified, and will support self-assessment taxpayers by introducing a time to pay arrangement from September 2025
- A consultation has been published which further explores options of strengthening the regulatory framework in the tax advice market, and the requirement of tax advisers to register with HMRC when they need to liaise with them on behalf of a client or clients. There’s also an intention to make it quicker and easier for tax agents to register with HMRC.
More Announcements
There were a couple of other announcements made which payroll professionals should keep on their radars, as indicated in the following:
Pensions ‘Small Pots’
Although not a new announcement, within his speech, the chancellor mentioned the important topics of the future of pensions “small pots” and the plans for employee “pots for life.” Current plans involve establishing a system where small pension pots of under £1,000 which are inactive for more than 12 months are automatically consolidated, with the aim of achieving better pensions adequacy for savers, as it will mean their savings aren’t eroded by fees. There are also plans to allow workers to nominate a pension scheme to pay all future automatic enrolment contributions into, to tackle the growing problem of small pots.
High-Income Child Benefit Charge
The High-Income Child Benefit Charge (HICBC) threshold was changed from April 2024, increasing from £50,000 to £60,000, with the top end of the taper rising from £60,000 to £80,000. The HICBC is a tax charge for recipients of child benefits payments, or their partners, on higher incomes. It previously applied where the recipient or their partner had an adjusted net income of £50,000 or more. The government’s long-term aim is to move the system on to a household income test (rather than an individual income test) for eligibility, but this will take time, as HMRC will require additional information. The intention, therefore, is for this to be introduced from April 2026.
In conclusion, although there weren’t significant amounts of news announced for the payroll industry, there’s a general feeling that significant changes are being announced, and with shorter times in which to introduce them. As always, be vigilant and keep your eyes peeled for further additional U.K. changes in the coming weeks and months.