Autumn Statement 2022: Employment Taxes

Scott McFarlane

Scott McFarlane

Employer Services Senior Manager

Whilst the Government recently confirmed the reversal of the Health and Social Care Levy which would have been a welcome move for employers, the few changes made in the Autumn Statement from an employment taxes and pay governance perspective may have dampened their mood a little.

The cost of employment has consistently increased over recent years and, whilst this is welcome from a fair pay and governance perspective, employers will feel the squeeze of the changes in the day-to-day costs of employment.

There will be a further increase to National Living/Minimum Wage rates with effect from 1 April 2023 with increases ranging between 9.7% to 10.9% across the different age groups. The revised hourly rates will be as follows from 1 April 2023:

16 - 17 years old£5.28
18 - 20 years old£7.49
21 - 22 years old£10.18
23 years+£10.42

The NMW ‘accommodation offset’ for employer provided accommodation has also been increased by 4.6% to £9.10.

As mentioned, this is a positive measure for employees but the big challenge for many employers with the minimum wage rates being pushed ever higher is that this then puts pressure to increase wages across the entire workforce to maintain pay differentials between the different grades, alongside ensuring that compliance is not otherwise impacted.

Along with these changes the level at which employers start to pay Class 1 Secondary NICs for their employees (the Secondary Threshold) will be fixed at £9,100 from April 2023 until April 2028.  With the additional increase in wages and no additional relief being provided by way of increased thresholds this will further increase employer costs.  One small note is that it was confirmed that the Employment Allowance rate will be retained and remain at £5,000, so employers can continue to benefit from this.

The wider NIC contribution rates and thresholds for 2023-24 have also been confirmed and these will be legislated for in secondary legislation in early 2023:

  • The Lower Earnings Limit (LEL) and the Small Profits Threshold (SPT) at 2022- 23 will remain at £6,396 per annum (£123 per week) and £6,725 per annum respectively.
  • The Upper Secondary Threshold, Apprentices Upper Secondary Threshold, and Veteran Upper Secondary Threshold, will stay fixed at £50,270 per annum until April 2028.
  • The Freeport Upper Secondary Threshold will also be fixed at £25,000 per annum.
  • Class 2 and Class 3 NICs rates for 2023-24 will be uprated.  The Class 2 rate will be £3.45 per week, and the Class 3 rate will be £17.45 per week.

Some additional points to note are around the provision of company cars.  The Chancellor advised that he is setting rates for company car tax until April 2028 and whilst these are increasing, they will continue to incentivise the take up of electric vehicles:

  • Appropriate percentages for electric and ultra-low emission cars emitting less than 75g of CO2 per kilometre will increase by 1% in 2025-26, a further 1% in 2026-27 and a further 1% in 2027-28 up to a maximum appropriate percentage of 5% for electric cars and 21% for ultra-low emission cars
  • Rates for all other vehicle bands will be increased by 1% for 2025-26 up to a maximum appropriate percentage of 37% and will then be fixed in 2026-27 and 2027-28
  • Car and Van Fuel Benefit Charges and van benefit charge will increase in line with CPI from April 2023.
  • The Government will legislate in Spring Finance Bill 2023 to extend the 100% First Year Allowance for electric vehicle charge points to 31 March 2025 for corporation tax purposes and 5 April 2025 for income tax purposes.

So whilst the cost of employment and benefit provision will be increasing, so too will HMRC scrutiny on process and governance and it is imperative that employers stay on top of this. 

It was announced that a further £79 million will be invested over the next five years to enable HMRC to allocate additional staff to tackle more cases of serious tax fraud and address tax compliance risks among wealthy taxpayers. This investment is forecast to bring in £725 million of additional tax revenues over the next five years, so we can expect more HMRC compliance reviews to be taking place.

Get in touch

Read the rest of our Autumn Statement analysis on our Budget Hub, and for more information or to discuss any of the announcements, please don't hesitate to get in touch with me.

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