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Overview of the new employment taxes

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Chancellor Philip Hammond has announced several changes that will impact employers from April 2020:

  • off-payroll working in the private sector for large and medium-sized businesses
  • changes to the Employment Allowance (EA) to support smaller businesses only
  • reforms to the National Insurance Contributions (NICs) treatment of termination payments and income from sporting testimonials originally due to come in from April 2019 have been pushed back to April 2020
  • a widening of the eligibility for the Short-Term Business Visitors, Pay As You Earn (PAYE) special arrangement and extending its deadlines for reporting and paying tax.

IR35/Off payroll  in line with public-sector bodies and agencies, the government will reform the off-payroll working rules (known as IR35) in the private sector from April 2020. This follows consultation and the roll-out of reform in the public sector rules from April 2017.

Responsibility for operating the off-payroll working rules will move from the individual’s personal service company to the organisation, agency or other third party engaging the worker. Small organisations will be exempt, minimising administrative burdens for the vast majority of engagers, and HMRC will provide support and guidance to medium and large organisations ahead of implementation.

Employment Allowance (EA) reform – from April 2020 the government will restrict access to employers with an employer NICs bill below £100,000 in their previous tax year. The EA provides businesses and charities with up to £3,000 off their employer NICs bill. Over 99% of micro-businesses and 93% of small businesses will still be eligible for the EA.

National Insurance Contributions Bill – there are two remaining measures in the draft NICs Bill published on 5 December 2016: reforms to the employers NIC treatment of termination payments over £30,000 and income from sporting testimonials. The government still intends to legislate for these reforms, which will now take effect from April 2020 and not April 2019 as originally planned.

Short-Term Business Visitors (STBVs) – following a consultation on the tax and administrative treatment of STBVs from overseas branches of UK headquartered companies, the government will widen eligibility for the STBV Pay As You Earn (PAYE) special arrangement and extend its deadlines for reporting and paying tax. This will reduce administrative burdens on UK employers with effect from April 2020.

Taxation of self-funded work-related training – following consultation responses indicating that tax relief is unlikely to be effective in addressing the barriers to learning or incentivising training, the government is maintaining the scope of tax relief currently available to employees and the self-employed for work-related training costs. Instead, the government is launching the National Retraining Scheme and skills pilots to help those in work, including the self-employed, to develop the skills they need to thrive. 

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Caroline Harwood
Caroline Harwood
Partner, Head of Share Plans and Employment Tax