“You don’t pay taxes; they take taxes” – Chris Rock
As all of us in the Tax field know, our new Chancellor will deliver her first Autumn statement on Wednesday 30th of October 2024 at 12:30 p.m.
So not long to go and the rumours will become a reality! From an Employment taxes perspective and being of a mature age (yes 21), I was concerned about the potential NIC on employer pension contributions and having one rate of tax relief on employee pension contributions. Aside from personal self-interest, from a work perspective, pension salary exchange arrangement could be a non-starter, a potential loss of revenue for the Employment taxes team.
However, reading today’s press, it appears the above are no longer in the Chancellor’s thoughts but the increase in employers NI is! Article from BBC here.
So, what does this mean for the Employment taxes team?
For all the reasons stated in the article, should this measure be announced in the Autumn Statement, this is going to put immense pressure on client’s bottom line. Despite the Government’s assurances, it will be a tax on jobs. However, this will make pension salary exchange even more attractive because there are employers NIC savings which could amount to 15.8% if the rumoured 2% hike goes ahead!
Whilst this is currently ‘speculation’ it is reasonable to assume that so late in the day, it is likely to be included in the Autumn Statement. This measure raises revenue, and it is debatable if it does not against the spirit of their manifesto! This coupled with recent news that one fifth of under 40s will be dragged into paying higher or additional rate by 2028 due to the freezing of tax thresholds mean that both employers and employees will need to explore ways to pay/receive their salaries in a tax efficient manner. Additionally, one of the other measures strongly expected is the extension of the tax thresholds freezing beyond 2028!
This is an ideal time to consider implementing a pension salary exchange, the benefits of which include:
- Providing pensions in a National Insurance efficient manner.
- Encourage employees to think about their saving for their retirement. Another stated aim of this government.
- Help employers to maximise their salary budget.
We have produced the following video (here) which helps to explain the pension salary exchange arrangements in a bit more detail. Please start having discussions with your clients about pension salary exchange with the caveat that we would have to wait for the 30th in case, Rachel throws a curveball!
Please contact Dinesh Pancholi, Senior Manager or any member of the Employment taxes team should you have any questions.
