The government confirmed last week that we can expect an Autumn Budget from the new Chancellor on 17 November.
The Government’s proposed tax regime changes
In the meantime, it has clarified that many of the previously announced tax changes (which we summarised in our October article) will not now go ahead. In summary:
- The current 45% additional rate of income tax will be maintained indefinitely.
- The proposed reduction in the basic rate of income tax from 20% to 19% (which was originally intended to take effect in April 2024) has been postponed indefinitely.
- The reversal of the 1.25% increase in National Insurance contributions will proceed as an announced in the Kwarteng mini-budget, on 6 November, and the Health & Social Care Levy will no longer be introduced in April 2023.
- Corporation tax will rise from 19% to 25% in April 2023, as originally proposed.
- The repeal of the recent raft of IR35 reforms introduced in 2021, which was intended to take effect from 6 April 2023, will not now go ahead. Instead, the current off payroll working rules will continue. Practically, that means that end user employers will retain responsibility for determining the deemed employment status for tax purposes of contractors that they engage through personal service companies. If a contractor is within scope of the current off-payroll rules, the fee payer (normally the employer) must ensure that they continue to account to HMRC for the appropriate income tax and NICs that are payable.
The new Chancellor, Jeremy Hunt, has confirmed that the plan to remove the cap on bankers’ bonuses will go ahead. It is understood that the Prudential Regulation Authority will launch a consultation on the proposals later this year. We summarised the key issues for employers to consider in our September article, available here.
Private Members Bills set out new employment rights
Despite the recent political upheaval, there have also been several legislative developments of importance to employers. Three new Bills, summarised below, indicate that the Government intends to progress its employment law agenda by way of Private Members Bills, rather than a standalone Employment Bill. In particular:
1. On the 21st of October 2022, the Government announced that it is supporting the new Protection from Redundancy (Pregnancy and Family Leave) Bill. It provides for new regulations to be introduced to extend the period of redundancy protection which currently exists for those on maternity, adoption or shared parental leave.
At present, employers must offer such employees a suitable alternative vacancy (in priority to their colleagues) before making them redundant. The Bill will extend the protection so that it covers the period of pregnancy and an extended period (potentially up to six months) following an employee’s return from maternity or parental leave. The timing of new regulations pursuant to the Bill is currently unclear.
2. Similarly, the Government is supporting the Carer’s Leave Bill, which reflects its previous commitment to introduce a week’s unpaid carer’s leave for employees with caring responsibilities.
Key aspects of the draft Bill include:
- The right to an unpaid week’s leave each year to provide or arrange care for a dependant with a long-term care need.
- Subject to specified notice periods, the leave can be taken in periods of a day or half a day (rather than the whole week at one time) to be taken over a 12-month period.
- A long-term care need will relate to an illness or injury lasting at least three months, a disability for the purposes of the Equality Act 2010, or old age.
If the Bill passes into law, the new unpaid right will take effect in 2024.
3. The Employment Relations (Flexible Working) Bill also successfully passed its second reading last week and the Government has confirmed it will support the Bill. The Bill proposes to amend the current flexible working request regime in the Employment Rights Act 1996 in the following key ways:
- A new requirement for employers to consult with employees before rejecting a flexible working request.
- The ability to make two flexible working requests in a 12-month period (in comparison to the current regime which permits one annual request).
- A reduction in the employer’s decision-making period in relation to a flexible working request from three months to two months.
- Removing the requirement for an employee to explain the impact of their request on the business.