Employment Tax & Reward Updates

Despite some predictions of changes to Employment Taxes, nothing new was announced in today's budget. Many of the key changes from an Employment Tax perspective were announced prior to the Budget.

Having said that, we set out some useful updates from the budget relating to National Minimum / Living Wage, The Health & Social Care Levy, and Company Car / Van benefit in kind tax rates:

National Minimum Wage / National Living Wage

As previously announced, NMW / NLW will increase from 1 April 2022. The increases are as follows:-

Category	Current Rate	From 1 April 2022	Increase of
23 and over	£8.91	£9.50	6.6%
21 and 22	£8.36	£9.18	9.8%
18 to 20	£6.56	£6.83	4.1%
16 and 17	£4.62	£4.81	4.1%
Apprentices	£4.30	£4.81	11.9%
Accommodation offset rate (per day)	£8.36	£8.70	4.1%

Changes to NLW – what does this mean for the Employer?

NLW increasing by 6.6%, represents a potential overall increase in Employer costs of 7.75% after taking into account the increases in NIC (the Health & Social Care Levy) from April 2022, Apprenticeship Levy, and Pension Contributions.

This is before even considering pay differentials and wage pressure for those earning above the NLW.

Changes to NLW – what does this mean for the Employee?

Taking into account the Personal Allowance freeze, Pension Contributions, and the increase in NIC (the Health & Social Care Levy) from April 2022, an increase in NLW of 6.6% potentially represents only a 4% increase in terms of net pay for the Employee. With the Chancellor announcing that inflation is expected to continue to rise, the increase may not be as significant as Employees may have thought. However, some workers may welcome the news of the tapering of Universal Credit reducing from 63% to 55% by 1 December 2021.

Key considerations:-

How Employers can remain compliant with NMW / NLW
How Employers reward Employees to manage & mitigate rising costs
How Employers can maximise net pay for Employees by considering changes to reward packages that align with the Employers’ objectives
Engaging off-payroll workers instead of Employees - IR35 Legislation requires consideration

Health & Social Care Levy – from April 2022

In September 2021, the Government announced an increase to National Insurance Contributions (“NIC”) of 1.25% for Employers, Employees, and the Self-Employed with effect from 6 April 2022. This is known as the Health & Social Care Levy (“HSCL”). From 6 April 2023, the HSCL will be identified separately and ring-fenced from the standard NIC.

For the 2022/23 tax year, Class 1 Primary, Class 1 Secondary, Class 1A, Class 1B and Class 4 NIC will increase by 1.25% to collect the HSCL.

For the 2023/24 tax year, Class 1 Primary, Class 1 Secondary, Class 1A, Class 1B and Class 4 NIC will decrease by 1.25% and the separately identifiable HSCL will apply. The HSCL is payable by Employers, Employees and the Self-Employed and will be charged at 1.25%. This levy will be deducted from pay in additional to Income Tax and NIC.

Further information can be found at:-

1) https://www.mazars.co.uk/Home/Insights/Autumn-Budget-2021/HSCL-changes-at-a-glance

2) https://www.mazars.co.uk/Home/Insights/Autumn-Budget-2021/HSCL-cffect-on-off-payroll-working

3) https://www.mazars.co.uk/Home/Insights/Autumn-Budget-2021/HSCL-impact-on-reward-strategies

Company Car Tax

As previously announced at the 2020 Budget, Company Car Tax rates already announced for 2022/23 will remain frozen until 2024/25. This announcement is welcome as it provides some comfort for those making decisions on vehicles now, helping ensure they won’t get a nasty tax surprise in a few years’ time.

For those Company Cars emitting high emissions, with rates for Electric cars staying low until at least 2024/25, Employers could consider offering more “green” cars to take advantage of the low rates of Company Car Tax. This could be achieved via salary sacrifice or reviewing reward strategy. We are aware of some employers utilising pool cars “for hire” to help workers who may now not need vehicles as much due to hybrid working/working at home.

Company Van Benefit in Kind charge

From 6 April 2022, the Company Van Benefit in Kind charge will increase in line with Consumer Price Index.

Company Car and Van Fuel Benefit in Kind charge

From 6 April 2022, the Company Car and Van Fuel Benefit in Kind charge will increase in line Consumer Price Index.

Get in touch

To find out how you or your organisation might be affected by the 2021 Autumn Budget please contact us.

Key contact

Ian Goodwin Partner – Employment Tax

Detailed profile

IR35 accounting and tax advice

From April 2021, changes will be introduced to the Off-Payroll Working (OPW) regulations. Our Employment Status specialists can help you ensure you are prepared for these changes and remain compliant.

Autumn Budget 2021

With much having been announced or shared in advance of the Chancellor rising to his feet, there were few elements left to surprise in what Rishi Sunak has labelled a Budget delivering a ‘Stronger Economy for the British People’.