Employment Taxes in the UK: Key Changes and Updates for 2024/25

Jenna McArtney

Jenna McArtney

Employment Taxes in the UK: Key Changes and Updates for 2024/25

There have been several changes to employment taxes that will impact both employers and employees. These changes, effective from the 2024/25 tax year, include adjustments to National Insurance Contributions (NICs), taxation on company cars and benefits, and modifications to PAYE and IR35 regulations. Let’s delve into these updates to understand their implications.

National Insurance Contributions (NICs)

Frozen Thresholds Until April 2028

  • Employer NICs: Continue to apply at 13.8% on earnings above £9,100 a year (£175 per week).
  • Employee NICs: Reduced 10% rate on earnings between £12,570 and £50,270, with a 2% rate thereafter.

Employment Allowance

  • Fixed at £5,000 Per Year: This allowance reduces the employer’s NIC liability and requires opting in via payroll software.

Company Cars and Other Benefits

Taxation on Non-Cash Benefits

  • Benefit in Kind: Taxation applies to non-cash benefits like company cars, with employers paying Class 1A NIC at 13.8% on their value.
  • Fixed Percentages Until April 2026: The rates used to calculate company car benefits are set until 5 April 2026, with slight increases for most car types from 6 April 2026.

Benefits-in-Kind Rates for 2024/25

  • Van Benefit: £3,960
  • Van Fuel Benefit: £757
  • Car Fuel Benefit Multiplier: £27,800

PAYE and Tax Returns

Changes to Self-Assessment Threshold

  • Removal of £150,000 Threshold: From 2024/25, individuals taxed only through PAYE will no longer need to file a self-assessment tax return if their income is below £150,000, potentially removing up to 338,000 individuals from the self-assessment system.

Off-Payroll Working (IR35) Rules

Adjustments for Fair Tax Collection

  • The rules, which ensure workers providing services through intermediaries pay similar taxes to employees, are undergoing changes.
  • New Provisions for HMRC: These changes will allow HMRC to give credit for any tax and NIC already paid by the worker and their intermediary, avoiding over-collection of tax.

These updates in employment taxes reflect a commitment to maintaining stability in NIC thresholds, simplifying tax obligations for some PAYE individuals, and ensuring fair taxation on company benefits. They also signify an effort to address complexities in the IR35 regulations. As always, MMG Chartered Accountants is here to help you navigate these changes, ensuring compliance and efficient tax management for your business and employees.