Emergency Mini Budget – what do SMEs need to know from an HR perspective?

You may have seen the headlines surrounding the government’s Emergency Mini Budget, especially those relating to tax cuts. But how will this impact small to medium-sized businesses from an HR perspective?

In summary, IR35 tax rules will be repealed from April 2023. This means contractors, rather than businesses, will now be responsible for determining their own employment status.

Self-employed contractors who provide their services through their own companies will now be responsible for paying the appropriate amount of tax and National Insurance (NI) contributions.

Alongside this, a 1.25% National Insurance cut has been announced by the new government. This will reverse the increase set out previously by Boris Johnson to help fund the NHS and social care. This will take effect from 6th November 2022.

Following this change, businesses are being encouraged to ensure their payroll systems are updated in time to reflect the government’s decision for the November pay period. This will ensure that employees are not overpaying on NI contributions.

If you have in place a salary sacrifice scheme, it is worth noting that these may also be impacted by this change to NI, so these should be reviewed to ensure the correct deductions are made.

In addition, the Chancellor announced that the basic rate of income tax will be cut from 20% to 19%, originally planned to take effect from April 2024 this has now been brought forward to April 2023. For incomes over £150,000, higher rate of income tax rates will also be cut to 40% from April 2023. Both the basic rate and higher tax rate changes will not apply in Scotland.

If you need further advice around any of these changes from an HR perspective or communicating these key changes to staff, please do get in touch.