This email has been updated to reflect subsequent changes reversing some of the announcements included in the mini-budget.
The Chancellor has announced the following changes of particular interest to HR and employment lawyers:
Changes to income tax and NICs rates
- From 6 November 2022 the 1.25% increase to the rate of National Insurance Contributions introduced in April 2022 will be reversed. NIC rates will revert to 2% and 12% for employee’s NICs and 13.8% for employer’s NICs. The Health and Social Care Levy will no longer be introduced.
- From 6 April 2023, the income tax basic rate will reduce to 19% and the 45% additional rate will be abolished. Update: the plan to abolish the 45% additional rate has since been scrapped.
- No employer’s NICs will be payable on salaries for new employees in Investment Zones, on earnings up to £50,270.
Off-payroll working reforms
The 2017 (public sector) and 2021 (private sector) reforms to the off-payroll working rules will be repealed from 6 April 2023. Workers providing their services to end-users via an intermediary will once again be responsible for determining their own employment status and paying the appropriate amount of income tax and NICs, rather than the end-user. Update: this change has now been scrapped – there are now no plans to make changes to the IR35 regime.
Legislation will be introduced to require unions to put ‘meaningful’ employer pay offers to a members’ vote before calling for industrial action. The government also intends to require transport services to maintain minimum service levels during disputes.
The Prudential Regulation Authority will remove the current cap on bankers’ bonuses. This cap limits remuneration of certain bank staff to 100% of their fixed pay (or 200% with shareholder approval). We expect this will apply for performance years starting on after 1 January 2023 but this detail has not yet been published. The Bank of England and Financial Conduct Authority will hold a public consultation on the proposal this autumn.
The government also announced that later this autumn it intends to bring forward an ambitious deregulatory package to unleash the potential of the UK financial services sector. This will include the government’s plan for repealing EU law for financial services and replacing it with rules tailor-made for the UK, and scrapping EU rules from Solvency II. Whether this will include a review of the “pay-out process rules” for remuneration remains to be seen.
Other relevant changes
The Office of Tax Simplification will be abolished when the Finance Bill 2023 receives Royal Assent, but is expected to continue gathering evidence on its review of hybrid and distance working in the meantime (see here). The deadline for responses to the call for evidence has since been changed from 25 November to 28 October.
From April 2023, qualifying companies will be able to issue up to £60,000 of CSOP options to employees, double the current £30,000 limit. The ‘worth having’ restriction on share classes within CSOP will be eased, better aligning the CSOP rules with the rules on the Enterprise Management Incentive scheme and widening access to CSOP for growth companies.
For further information see the Growth Plan 2022 documents published by the government.