National Insurance contributions

National Insurance is currently charged at 12% on earnings between £12,571 and £50,271 and 2 per cent on anything above that. Employees will see the main rate of National Insurance cut from 12% to 10%. The change will be rolled out from 6 January 2024, rather than the new tax year in April.

National Living Wage (NLW)

NMW will rise by 9.8% from April 2024, increasing from £10.42 to £11.44 per hour. For the first time, it will be expanded to cover 21 and 22 year olds.

The NMW rates for younger workers will also increase, with 18 to 20 year olds seeing their pay rise by £1.11 to £8.60 per hour.

Apprenticeships

The government will introduce £50m in funding over the next two years to boost the levels of apprenticeships in the UK in "key growth areas” such as engineering, manufacturing, green industries, artificial intelligence and life sciences. It also intends to address the barriers to entry to higher level apprenticeships. Pay for those undertaking apprenticeships will also rise, with an 18-year-old apprentice in industries, including construction, seeing their minimum hourly pay increase from £5.28 to £6.40 an hour from April 2024, in line with the NLW changes above.

Pensions

The government will consult on a lifetime provider model which would give workers a legal right to require a new employer to pay pension contributions into their existing pension pot if they choose, meaning people can choose to have one pension pot for life.

Occupational Health

The new Back to Work Plan which was announced by the government on 16 November 2023 was given funding in the Autumn Statement. Following the government consultation into Occupational Health (OH) which concluded in July 2023, the government has announced it intends to provide clearer guidance and support through the establishment of an expert group to advise on a new voluntary OH framework. The framework will set out the minimum level of OH intervention needed to improve employee health at work.

Fit note reform

The government has announced its intention to launch a consultation into fit note reform to support more people to resume work after a period of illness. This will include improvement of fit note assessments, new designs of the fit note form and the quicker provision of specialised employment support to return to work. The government will also be conducting trials to make referrals to health and employment services easier and improve digital access. The consultation is scheduled for 2024.

IR35 – Off-Payroll working

Following consultation, the government has confirmed it will legislate 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 IR35 rules. This is a positive development for employers.

Under the current rules, if HMRC disagree with the end user’s assessment that a contractor who is using a personal services company (PSC) is outside the IR35 rules, PAYE and employee and employer national insurance contributions (NICs) be paid on the fees paid to the intermediary going forwards. However, HMRC will also seek PAYE and NICs arrears together with interest and potentially penalties. The end user is not able to take account of any tax or NICs paid by the intermediary.

The announcement confirms that legislation will be introduced to allow end users to offset an amount equal to HMRC’s best estimate of the corporation tax or income tax paid by or assessed on the intermediary in respect of the fees received from the end user against arrears of PAYE (and NICs) assessed after 6 April 2024. The mechanism will be available for arrears going back to April 2017 (when IR35 was changed for the public sector).

What does this mean for employers?

Many of these developments will not come into force until further consultation is conducted. However, there are some changes which will come into effect in April next year and some, such as the NIC changes, which will come into force in January 2024. As such, employers' payroll departments will need to move quickly to implement these changes.

Autumn Statement 2023