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The current Chancellor of the Exchequer, Jeremy Hunt, recently presented his Autumn Statement in which the government’s five focus areas were outlined: reducing debt, cutting tax, backing British business; building domestic and sustainable energy; and delivering world-class education. Here we examine the Statement and look at how it affects contractors, recruiters and end-clients.

IR35

IR35 is only mentioned once within the statement – on page 91 – “5.50 Off-Payroll Working (IR35) – calculation of PAYE liability in cases of non-compliance – The government will legislate in the Autumn Finance Bill 2023 to allow HMRC to reduce the PAYE liability of a deemed employer to account for taxes paid by a worker and their intermediary on payments received where an error has been made in applying the off-payroll working rules.”

This simply means that if there has been an error in applying the off-payroll working rules, and fines or financial penalties have been imposed, the end-client will not have to pay twice, as has been the case in some instances over recent years. This will ease the financial burden on employers if they have received financial penalties for irregularities with the designation of contractors.

National Insurance

Various NI reforms were announced in the statement, the most prominent one being that the main rate of Class 1 employee NI Contributions (NICs) will fall from 12% to 10% from 6 January 2024, not April which is the usual point of tax change. This, the government says, will result in the lowest rate of combined income tax and NICs since the 1980s. 

The self-employed will also benefit from a cut in the main rate of Class 4 self-employed NICs by one percentage point to 8% from 6 April 2024. This, the government estimates, will affect around 2 million people,

Finally, the government is abolishing Class 2 self-employed NICs from 6 April 2024. This affects self-employed people with profits above £12,570 who were previously required to pay a weekly, flat rate which was due to rise to £3.70. This single contribution, the government says, will simplify the system but enable self-employed people to receive access to contributory benefits such as the State Pension.

National Minimum/Living Wage

The chancellor announced that the National Living Wage (NLW) would be increasing by 9.8% to £11.44 per hour, for those aged over 21 years of age who are eligible. Young people and those people on apprenticeships who are on the National Minimum Wage (NMW) will also see an increase.

Pensions

As well as announcing that the Pension Triple Lock was to be honoured with an 8.5% increase in April 2024, it also said that it was allowing people to have their pension contributions paid into their existing pension scheme if they change employer. 

Business Rate Relief

Business owners will benefit from the announcement that the current multiplier would remain frozen for small businesses for a further year. 

Our response

While we welcome tax and NIC cuts overall, and the increase in the NLW and NMW, we are disappointed that the Chancellor did not put forward further and more ambitious reform of the umbrella industry, particularly regulation, without which thousands of hard-working contractors who use non-compliant umbrella companies are in danger of financial penalties every week. 

In respect of the new NI and NLW and NMW rates, we will be updating and sending out new Key Information Documents (KIDs) to all our recruitment partners in January. These KIDs will reflect the new rate and therefore the increased amount of money that contractors will be allowed to retain. 

We also welcome the pension reforms suggested by Mr Hunt, particularly as we encourage all our contractors to take advantage of salary sacrifice for pension contributions so they can save for retirement in a tax-efficient manner.

Get in touch

If you’re a contractor who needs more information about how the Autumn Statement affects you, particularly as an umbrella employee, or you’re a recruiter anxious to pass on the benefits of the statement to the contractors you find work for, you can call us for a confidential chat on 0333 200 0845. You can also email us at [email protected] or complete our contact form here.