Employment and mobility tax changes

Further to the announcements made in the ‘mini-Budget’ on 23 September 2022, new Chancellor Jeremy Hunt announced on 17 October 2022, he will reverse nearly all the changes.

Income tax cuts and bonus caps

The planned reduction of the basic rate of income tax and the abolishment of the 45% top rate of income tax will no longer go ahead.

The lifting of the cap on Bankers’ bonuses remains and details on what this entails are yet to be announced.

Health and Social Care Levy and National Insurance Contributions

The Chancellor confirmed the reversal of the increase to the National Insurance Contributions (NIC) rates introduced in July 2022, and the introduction of the Health and Social Care Levy (HSCL) in April 2023, will go ahead as planned.

This means:

• from 6 November 2022, the current employee and employer rates of Class 1 NIC will revert back to pre-July 2022 rates, a reduction of 1.25%
• the 1.25% HSCL which would have applied from April 2023, will not be implemented
• the increase to the NIC threshold at which NICs start to become liable, has not been reversed.

For the 2022/23 tax year, employers who are liable to Class 1A NICs or Class 1B NICs the rate is aggregated to 14.53%.

Employers will welcome the reduction of payroll costs and employees will see their after-tax pay rise. The November change will mean yet another change for payroll systems and already stretched payroll teams to communicate, implement and test. This will also be welcome news to employees who are over state pension age to the levy would have applied.

Impact on the global mobility

The NIC raise cancellation will be a pleasing cost reduction for UK inbound movement where individuals and their employers may no longer remain within their home country social security schemes.

Off-Payroll Working/IR35

The repeal of Off-Payroll Working legislation introduced in 2017 and 2021 will not go ahead.

Medium / large sized organisations and public sector bodies will still need to determine the employment status of labour they receive from individuals who provide their services through their own Personal Service Company/intermediary.

Investment Zones

It was confirmed new Investment Zones will be created in the UK to drive growth and lowering taxes.

Employers in designated Investment Zone areas will benefit from a zero rate for Employer National Insurance Contributions on new employee earnings up to £50,270 per year. This may result in intra-UK talent mobility and raises interesting questions from a payroll implementation perspective.

Company Share Option Plan (CSOP)

From April 2023, the limit at which qualifying companies can issue share will double to £60,000 of CSOP options to employees.

Additionally, the ‘worth having’ restriction on share classes within CSOP will be eased.

Impact on the global workforce

The increase in CSOP limits will be of particular interest to multi-national employers that operate LTIPs, who may conclude if now is the right time again to consider implementation of UK tax approved plans.

For any queries in the meantime, please contact Dinesh Jangra or your usual Crowe contact.