Guidance

December 2024 issue of the Employer Bulletin

Published 4 December 2024

Introduction

In this month’s edition of the Employer Bulletin there are important updates and information on:

PAYE

Tax updates and changes to guidance

General information and customer support

HMRCs support for customers who need extra help

HMRCs principles of support for customers who need extra help set out our commitment to support customers according to their needs and underpin the HMRC Charter.

Find out how to get help and the extra support available.

PAYE

Employer National Insurance contributions and Employment Allowance changes announced at Autumn Budget 2024

At Autumn Budget 2024, the government announced changes to employer National Insurance contributions (NICs). The changes that will take effect from 6 April 2025 are:

• a reduction in the NICs secondary threshold
• an increase to the rate of secondary Class 1 NICs
• an increase in the Employment Allowance
• the removal of the Employment Allowance £100,000 eligibility threshold

The secondary threshold is the point at which employers start to pay NICs on an employee’s earnings. The secondary threshold will reduce from £9,100 a year to £5,000 a year from 6 April 2025 until 5 April 2028, and then increase by Consumer Price Inflation thereafter. This does not affect the various employer upper secondary thresholds that exist for different employer NICs reliefs.

The employer NICs rate will increase by 1.2 percentage points from 13.8% to 15%. This rate will also apply to Class 1A and Class 1B which are expenses and benefits that employers give to their employees.

At the same time, the government is:

• increasing the Employment Allowance from £5,000 to £10,500
• removing the £100,000 threshold to expand to employers of all sizes

This means all eligible businesses and charities will be able to claim a greater reduction on their secondary Class 1 NICs liability regardless of what their NICs liabilities were in the previous tax year.

Most employers will not need to take additional action as a result of the NICs changes as they will be reflected automatically in updates to payroll software. We are working with software developers on the budget changes.

Some micro and small businesses will see no change in NICs liability.

Further information can be found at Autumn Budget 2024 — Overview of tax legislation and rates (OOTLAR).

Tax-related documents, which include tax information and impact notes, can be found at Autumn Budget 2024 tax related documents.

You can also read more about paying NICs at Running payroll — deductions.

Further information on Employment Allowance is available and will be updated to show the budget changes on 6 April 2025.

Automatic enrolment duties for festive season workers

If you employ short-term staff for the festive season who are not on regular hours or incomes and are being paid through a payroll system, automatic enrolment legal duties may apply to you. This includes staff who work for a few days, weeks, or months.

You must work out who to put into a pension scheme by assessing staff individually, every time you pay them, taking into account what their ages are and how much they earn.

Any staff that are aged 22 to state pension age and earn over £192 a week or £833 a month, must be put into a pension scheme which you must contribute towards. Further information on employing seasonal or temporary staff can be found on The Pensions Regulator website.

Evidence required to claim PAYE employment expenses 

On 14 October 2024, HMRC introduced new evidence requirements for customers claiming PAYE (Pay As You Earn) (P87) employment expenses. More information can be found within the HMRC issue briefing — Evidence required to claim PAYE (P87) employment expenses.

We want to make sure that customers get the tax relief they are entitled to. However, we also need to make sure that we identify where customers are not eligible and prevent them receiving payments they are not entitled to. 

When customers send us evidence for PAYE employment expense claims, HMRC will be checking all evidence and will confirm with customers whether they are entitled to tax relief. 

Employers can help their employees understand what they can and cannot claim for by sharing the link to our campaign page: Don’t get caught out — claiming expenses.

Employers are also welcome to use our tax relief on work expenses — communication resources, which has material prepared to help facilitate these conversations with employees.

Electronic payment deadline falls on a weekend

In December 2024 the electronic payment deadline falls on Sunday 22 December 2024. To make sure your payment for the month reaches us on time, you need to have funds cleared into HMRCs account by 20 December 2024, unless you are able to arrange a Faster Payment.

It is your responsibility to make sure your payments are made on time and if your payment is late, you may be charged a penalty.

Check your bank or building society’s single transaction daily value limits and cut-off times well in advance of making your payment. Make sure you know when to initiate your payment, so it reaches HMRC on time.

Further information can be found at pay employers’ PAYE.

Guidelines for Compliance — Help with the Apprenticeship Levy and Employment Allowance — connected entities

HMRC has recently published new Guidelines for Compliance — Help with the Apprenticeship Levy and Employment Allowance — connected entities.

These guidelines clarify the connected entities rules to help employers correctly report the Apprenticeship Levy and claim Employment Allowance. The term ‘entity’ includes companies, charities, and public bodies (and their related organisations).

These guidelines:

• explain how the connected entities rules impact the Apprenticeship Levy and Employment Allowance
• highlight the common errors employers make
• give practical advice on how to identify connected entities
• provide help on the unique scenarios in the public body population
• set out how employers can correct any errors made

The guidelines are a practical product for customers to refer to and should be read alongside HMRCs existing guidance. They will be updated as necessary to maintain their relevance and usefulness to customers.

Guidelines for Compliance are part of HMRCs ongoing commitment to publishing practical support for customers. They provide HMRCs view on complex, widely misunderstood, or novel risks that occur across tax regimes.

More information, including our other publications, can be found on Guidelines for Compliance.

Support if your employees have paid too much tax — claim a tax refund

HMRC has changed the way it repays the majority of PAYE (Pay As You Earn) customers who are eligible for Bacs (Bankers Automated Clearing Services) refunds and can claim their refund online.

Previously, any employees who received a P800 tax calculation letter and did not claim the refund online would automatically receive a cheque after 21 days. From 31 May 2024 cheques were no longer issued automatically. Customers will need to take an action to receive their refund.

If you or your employees have paid too much tax, the quickest and easiest way to claim a refund is through the HMRC app. We will pay the refund straight into your bank account within 1 week of your claim.

To claim your tax refund, select the ‘Pay As You Earn (PAYE)’ section in the HMRC app. If you are due money back from us, you will see a green button on the page to claim your refund and the amount you are owed. Select this button to begin your claim.

If you have not yet signed up to our online services, you can still claim your refund online by searching ‘P800 refund’. You will need your P800 reference number (you can get this from your P800 Tax Calculation letter) and your National Insurance number. More information can be found at tax overpayments and underpayments.

Employers PAYE and Construction Industry Scheme repayments

We advised that HMRC was introducing improvements to support online claims for repayment in the October 2024 edition of the Employer Bulletin. 

HMRC has now published an improved version of the online repayment claim form at claim a refund of Construction Industry Scheme deductions if you’re a limited company or an agent. 

This online claim form will enable you to upload evidence, including payment and deductions statements and bank statements when requested by HMRC. The form will also link to guidance to check when you can expect a reply from HMRC.

We will provide a further update regarding the new online claim form for PAYE repayments when this is published.

Confirming plans to mandate the reporting of benefits in kind through payroll software from April 2026

At Autumn Budget, the government announced some updates to the January 2024 proposals to mandate the reporting of benefits in kind through payroll software from April 2026. The main adjustments we have made are:

• mandatory reporting of benefits in kind (BiKs) in real time, through payroll software, will be introduced in a phased approach from April 2026 — employers will be required to payroll most benefits from April 2026, but will not be required to payroll loans and accommodation at that time
• employers will be able to report employment related loans and accommodation through payroll software on a voluntary basis from April 2026 — a modified P11D and P11D(b) will be available to report just loans and accommodation if employers do not wish to payroll these
• no decision has been made as to when we will mandate the reporting of loans and accommodation through payroll software — careful consideration will be given to make sure sufficient notice of any change will be provided
• an end of year process will be introduced to amend the taxable values of any BiKs that cannot be determined during the tax year, however, we expect the taxable values of most BiKs to be reported as accurately as possible during the tax year
• the requirement to submit P46 (Car) forms will be removed as functionality will be provided to report the data required through payroll software in real time

We will continue to work with stakeholders to make sure that the mandatory reporting of BiKs through payroll software works for both HMRC and taxpayers. We will provide updates on plans to publish draft legislation and technical specifications.

2025 to 2026 student and postgraduate loans thresholds and rates

Department for Education announced the new student loan plan type and postgraduate loan thresholds and rates from 6 April 2025: 

• plan 1 — £26,065
• plan 2 — £28,470
• plan 4 — £32,745
• postgraduate loan — £21,000

Deductions for: 

• plan type 1, 2 and 4 remain at 9% for any earnings above the respective thresholds
• postgraduate loan remains at 6% for any earnings above the respective threshold

Guidance on the new student and postgraduate loan thresholds will be updated on 6 April 2025. 

Go paperless with PAYE Online

You can choose to receive tax code and student loan notices for your employees digitally rather than by paper.

This means you can get them more quickly and free up office storage space because once you have opted for paperless you can view all your employees’ notices online.

If your business runs your own payroll, please pass this message to the right person in payroll or HR.

To opt into paperless:

1. Sign into your PAYE Online account.

2. Choose ‘Messages’.

3. Choose ‘PAYE for employers messages’.

4. Choose ‘Change how you get tax code and student loan notices’.

5. Select the notices you would like to receive digitally.

After you have completed these steps, you can choose to get an email when there is a new notice in your account. Go to ‘Notices email’ and enter your email address.

If your tax agent runs your payroll ask them to choose to get notices digitally in PAYE Online — they will get them much faster, and you will not need to send them your paper copies.

Tax updates and changes to guidance

Basis period reform — reporting on a tax year basis

From April 2024, if you are self-employed or in a trading partnership, you will have to report your profits on a tax year basis.

If you do not already do so, you will need to declare your profits from the end of the previous accounting period in 2022 to 2023 up to 5 April 2024. Any additional profit, after overlap relief, will be transitional profit. By default, this transition profit is spread equally over the next 5 years including 2023 to 2024. Accounting periods ending on 31 March will now be treated as equivalent to those ending on 5 April.

To help you calculate your overlap relief and transitional profits, HMRC recently published a YouTube video on basis period reform.

Get help with basis period reform (moving to the new tax year basis).

We have recently seen a major increase in requests to provide overlap relief figures. To help us deal with demand for this service as we approach the 31 January 2025 deadline we ask you to make your requests by 31 December 2024. You can also file the return using provisional figures and amend this when the correct figure is received. Only use this service if it is necessary, as it is not intended to be used to ‘check’ a figure that you already hold and there is no requirement to use the service before filing a return.

Use the online form to check when you can expect a reply from HMRC.

We have also launched a full package of online guidance to work out your basis period reform transition profit. Any figures entered into the interactive guidance do not form part of the return itself, it is there to guide completion of the boxes on the return.

Profits incurred in the 2023 to 2024 tax year can be reduced by any overlap relief which is entered on the 2023 to 2024 Self-Assessment return. You can use our online service to get your overlap relief figure.

Further guidance to get help with basis period reform is available.

Help your employees access the financial support they are entitled to

From 6 April 2024, the amount you can earn before you need to pay the High Income Child Benefit Charge increased to £60,000, with a taper up to £80,000. If your employees, or their partners, have incomes between £60,000 and £80,000 they may now benefit financially from claiming Child Benefit. 

The charge is 1% of their Child Benefit for every £200 of income that exceeds £60,000. If an employee’s income, or their partners income, is over £80,000 the charge is the same as the Child Benefit payment. However, if their income is £70,000, the charge would equal 50% of their Child Benefit payments.

Your employees may now be interested in claiming Child Benefit or restarting their payments if they have previously opted out. The easiest way for your employees to get Child Benefit is through the HMRC app or online.

Preparation for the 31 January 2025 Self Assessment deadline

Remind your employees that if they or their partner claimed Child Benefit before 6 April 2024, and the higher earner had an individual income of over £50,000, they may have to pay the tax charge for 2023 to 2024. They can check the Child Benefit tax calculator to find out more. If they need to pay the charge, they must register for Self Assessment.

Official rate of interest from 6 April 2025

The official rate of interest (ORI) is used to calculate the Income Tax charge on the benefit of employment-related loans and the taxable benefit of some employment related living accommodation. The government announced at budget that the previous public commitment, made in January 2000 to not increase the rate during the tax year, will no longer be applicable. As of 6 April 2025, the ORI may increase, decrease, or be maintained throughout the year.

The rate will continue to be reviewed on a quarterly basis. Any changes in the rate will occur following a quarterly review, where appropriate. If there are any in-year changes to the rate, these will take effect on 6 July, 6 October and 6 January. Any future changes to the rate will be published online at beneficial loan arrangements — HMRC official rates.

This change will increase fairness across the tax system by enabling the ORI to increase in-year where appropriate, ensuring employment-related beneficial loans and living accommodation are correctly valued. 

Further information can be found at Autumn Budget 2024 — overview of tax legislation and rates (OOTLAR).

How this will affect employers

If you provide employment-related loans or living accommodation to your employees, you will need to remain aware of any future changes in the rate. As of 6 April 2025, the rate may increase in-year which will impact the taxable value of the benefits you provide.

Investment Zone employer National Insurance contributions relief guidance

Investment Zones have been designed as a locally led intervention to drive the government’s growth mission by promoting new investment in sectors that are vital to the national Industrial Strategy, creating highly skilled jobs in areas which have underperformed economically in the past. Investment Zones in Great Britain can benefit from access to interventions of £160 million over 10 years which can be used flexibly between spending and tax reliefs. The government has also committed to providing £150m for an Enhanced Investment Zone in Northern Ireland.

As part of this offer, some Investment Zones will include designated special tax sites. These are defined areas where businesses can take advantage of a range of tax reliefs. For Investment Zones, these tax reliefs can be claimed from the date the special tax site is designated, until 30 September 2034.

Employers with business premises in a designated Investment Zone special tax site can apply a zero rate of secondary Class 1 National Insurance contributions on the earnings of eligible new employees who are expected to spend 60% or more of their working time in the special tax site. This rate can be applied on the earnings of all eligible new employees up to the Freeport and Investment Zone Upper Secondary threshold of £25,000 per year. The relief is available for 36 months per eligible employee.

From 6 April 2025 an eligible employer operating in a designated Investment Zone special tax site, and who wishes to claim the relief, will be required to provide the workplace postcode for any eligible employees within the RTI Full Payment Submission.

Find out more information about:

• Investment Zones in England

• if you can claim National Insurance relief in UK Freeport or Investment Zone special tax sites

General information and customer support

Help your employees top up their State Pensions

 Your employees have until 5 April 2025 to fill gaps in their National Insurance records back to 6 April 2006, which could boost their State Pension. After the 5 April 2025, they will only be able to fill gaps for the previous six tax years. 

The HMRC app and our online service enables most customers to quickly and easily:

• check if there are gaps in their National Insurance record, find out more about checking their record for gaps in voluntary National Insurance
• find out if making a payment would increase their State Pension and then make a payment if they can

Choosing the ‘pay by bank account’ option means it will only take up to five working days for their payment to show in their National Insurance record.

You should let your employees know and encourage them to act now.

UK subsidy reporting arrangements for climate change agreement scheme participants for calendar year 2023 

HMRC is required to collect data from climate change agreement (CCA) scheme participants whose annual tax subsidy award is above a defined threshold.

The threshold for reporting subsidy information is over £100,000. 

Businesses registered in Northern Ireland trading in goods or the wholesale electricity market will need to report their annual CCA subsidy award if it exceeds £86,994. Find more information about complying with the UK’s international obligations on subsidy control.

In October, HMRC launched a data collection exercise for the reporting period between 1 January to 31 December 2023. UK businesses are now required to report CCA subsidy information to HMRC through an online form.

This data will be published showing all subsidy awards above the reporting thresholds to promote accountability and transparency.   

Businesses who receive an annual tax subsidy award exceeding the reporting thresholds for calendar year 2023, must complete the online form by 31 January 2025. 

Further guidance on reporting Climate Change Levy subsidies to HMRC is available, including a link to the online form.

Spotlight 65 — General Data Protection Regulation provision used to reduce tax liability

HMRC is aware of tax agents that target businesses to claim Corporation Tax (CT) refunds through incorrect provisions, linked to potential General Data Protection Regulation (GDPR) fines or civil claims.

GDPR provision used to reduce tax liability — Spotlight 65 warns about claims featuring GDPR provisions used to incorrectly reduce CT liability or claim repayments of tax already paid, or both.

These claims are designed to reduce business profits through the recognition of a provision and a corresponding expense. This leads to businesses paying less CT than they should, or claiming CT repayments they are not entitled to. Provisions and related expenses should only be recognised in accordance with relevant generally accepted accounting practice (GAAP).

HMRC’s view is that these and similar claims are not in accordance with the law. HMRC will challenge anyone making such claims and/or who encourages or facilitates businesses to make false claims that reduce tax liability or seek a repayment.

Your business should be alert to the details contained in Spotlight 65 as making claims in the way outlined could lead to an error on which tax, interest, and penalties may be due, even if the Research & Development element is correct.

If you have any concerns or are worried about having made an incorrect claim then refer to tax avoidance — getting out of an avoidance scheme for contact details.

You can use our online form to report tax fraud and tax avoidance arrangements, schemes and the person offering you them to HMRC.

Spotlight 66 — Limited Liability Partnerships arrangements used to disguise employment income

Limited Liability Partnerships arrangements used to disguise employment income — Spotlight 66 warns of a tax avoidance scheme called “The Partnership Model” being marketed to avoid payment of tax and National Insurance contributions (NICs). The arrangements are targeted at companies who have employees and are designed to avoid the payment of Corporation Tax and the PAYE deduction of Income Tax and NICs from their employees.

This scheme is claimed to work as follows. An employee of a company enters into an agreement. As a result of this agreement the employee’s employment contract could be changed or terminated in exchange for a compensation payment.

Upon entering the agreement, a Limited Liability Partnership (LLP) is created to pay an employee. This allows the company, through the use of the LLP, to disguise employment income, with the aim to reduce the company’s tax and National Insurance liability.

Your business should be alert to the details contained in Spotlight 66 as it is HMRCs view that this scheme does not work. Scheme users continue to be employees and payments made to them from the company should be treated as taxable employment income.

If you are worried about having used this scheme, or any other avoidance scheme, you should refer to tax avoidance — getting out of an avoidance scheme for contact details.

You can use our online form to report tax fraud and tax avoidance arrangements, schemes and the person offering you them to HMRC.

How to complain

HMRC would like to make sure that all customers are happy with the service they receive.

If you need to complain about the service you have received as an employer, we encourage you to do so online, following the guidance at complain about HMRC. You can complain online if you are a business or if you are an agent — where you have permission from your client to do this on their behalf. HMRC will review your complaint fully and as soon as possible.

Complaining online, rather than by telephone, will help HMRC to better use resources for customers who need support with complex or urgent queries.

HMRC records all complaints to understand the reasons for poor service, so complaining online will also enable you to clearly set out what happened, which will help HMRC to prevent further issues and deliver improvements.

Free cyber security toolkit for small businesses

The National Cyber Security Centre has developed a new, free government service aimed at helping small businesses protect themselves against cyber criminals.

My Cyber Toolkit has been designed with input from businesses and offers simple step-by-step guidance tailored to small businesses to help increase their cyber resilience.

The Toolkit is still in the early stages of development and you can have early access to the service to try it out and provide valuable feedback which will help shape the tool for millions of small businesses across the UK.

HTML format of Employer Bulletin

Since September 2020, material published on GOV.UK or other public sector websites must meet accessibility standards. This is so they can be used by as many people as possible, including those with:

• impaired vision

• motor difficulties

• cognitive impairments or learning disabilities

• deafness or impaired hearing

There is now a contents page, with links, which is fully scrollable. Articles have been put into categories under a heading which is within the introduction to make it easier to find the updates and information you are interested in.

The HTML format does allow you (dependent upon your web browser):

• to print off the document should you wish to keep a paper file:

  • select the ‘Print this page’ button underneath the contents and print to your local printer

• to save the document as a PDF:

  • select the ‘Print this page’ button and using the drop-down list on the printer select ‘print to PDF’, which allows you to save as PDF and file electronically

  • on a mobile device you can select more options, then select options to be able to save as PDF

Getting more information and sending feedback

Make sure you are kept up to date with changes by signing up to receive our email alerts.

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Send your feedback about this Employer Bulletin or articles you may wish to see, by email to [email protected].