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2024 sees new tax laws applying in the UK. Here we look at what they are, how they’ll impact you as a recruiter, and how we can help you adapt to the changes.

National Insurance

The most prominent change is that National Insurance (NI) was cut on 6 January 2024. This means that the main rate of Class 1 NI contributions fell from 12% to 10%. The Office for Budget Responsibility (OBR) estimates that this will help over 27 million people, including many contractors. Basic-rate taxpayers are expected to gain £304 per year, higher-rate taxpayers will benefit by £647, and those people who pay the additional rate will be £707 better off. 

Whilst this is good news for hard-working contractors, it can mean additional bureaucracy for recruitment agents if they have to update their records and payroll systems to include the extra income that contractors are entitled to after the tax cuts. Luckily, if you’re partnered with an umbrella company like Payme, you won’t have to do a thing. Our sophisticated software will automatically adjust the payments your contractors receive and make the appropriate payments directly into their bank accounts, as well as pass on the correct amount of statutory contributions to HMRC.

What’s more, we’ll automatically adjust your contractors’ KIDs and send them an updated version (as required by law), massively reducing the amount of paperwork you have to complete. 

National Living Wage

The National Living Wage (NLW) will also increase by 9.8% to £11.44 per hour for people aged over 21. The Government estimates that this will help over 2.7 million workers, with an average increase of £1,800 per year. Young people and apprentices will also see a rise of 6.7% in April. 

We discussed the effect that the rise in the NLW and the NMW will have on both end-clients and recruiters here and the importance of ensuring that the increased rate is passed onto your contractors. However, like in the case of the NI cut, partnering with a compliant umbrella company such as Payme can mean that this process runs smoothly for you, with the minimum of inconvenience for everyone involved.

Dividend Tax

If any of your contractors are shareholders they may be required to pay dividend tax. This is a tax on income they derive from shares they hold in various companies. The latest tax changes have reduced the dividend allowance (on which people don’t pay tax) from £1,000 to £500. Calculating this allowance into contractors’ take-home pay and adapting to the new rates can be a complex procedure, often involving the skills of a qualified accountant and their bespoke software. 

If your recruitment agency doesn’t have access to such a specialist or the software required, it can be an onerous task to calculate each contractor’s allowance and factor it into the amount they receive each week or month. That’s where Payme can help. By outsourcing your payroll functions to us, we handle these complicated calculations on your behalf, saving you time, and money and reducing your stress levels.

Capital Gains Tax

If you have an item of value and you sell it, you are liable to pay tax on the profit you make – that’s Capital Gains Tax (CGT). The amount you pay in CGT is changing in April of this year which means the threshold will be £3,000 and any profits over this amount will be liable for tax. 

Once again, it can be challenging for recruiters to incorporate all these changes in thresholds and tax increases or decreases into up-to-date and prompt payments that they need to make on behalf of their contractors, and any missed payments to HMRC can have serious implications if and when they are discovered. By partnering with Payme we’ll take care of all your contractors’ tax obligations, incorporating all the information we’re required to by law, and calculating the correct amount that both they and HMRC receive, so you don’t have to.

Our tried and tested contractor payment services for recruiters offer Umbrella PAYE, CIS or Outsourced payroll solutions and we pride ourselves on the highest levels of service possible. We help over 250 agencies throughout the country, paying over 4,000 contractors every week and providing them with compliant (we are FCSA accredited), reliable and cost-effective results. If you’d like more information about how we can help you adapt to the impact of new tax laws call us on 0333 200 0845, email us at [email protected] or fill in the contact form here.