Jeremy Hunt Gives Accountants a Big To-Do List for Christmas

Don’t book your annual leave yet – Jeremy Hunt has just handed accountants quite a job to do before Christmas.

The Autumn Statement on Wednesday delivered a huge number of changes that will influence the work of accountants and payroll teams. Much of it will be welcomed by businesses and workers, set to see more rates relief and a cut to National Insurance rates respectively. But as ever, someone has to make sure all those changes happen smoothly. Here’s what you now need to sort out before cracking out the Christmas sherry.

The big one: National Insurance changes

The headline task for accountants, particularly payroll staff, is the implementation of a reduction in Class 1 National Insurance contributions (NICs) for employees, dropping from 12% to 10%. This move, set to take effect from January 6, comes out of cycle, adding some urgency and complexity to the end-of-year tasks for financial professionals.

This 2% cut in NICs marks a significant deviation from previous expectations – a few months ago we all expected that the Government wouldn’t have the fiscal room to seriously cut taxes, outside of perhaps a change to Inheritance Tax. Almost all employees pay Class 1 National Insurance so will see a decent-sized tax cut.

Luckily, most payroll staff should now have quite a bit of experience changing NICs urgently. Last year, these NIC rates shot up to a high of 13.25% before being scaled back to 12% in the ‘mini-budget’. If your software and systems were able to handle those changes fairly rapidly, it should be ready for these changes too.

The timing of these alterations, implemented out of the usual cycle, will add to the workload of accountants and payroll staff, who will already be grappling with traditional year-end activities such as Christmas bonus payments and possibly early payment dates, as many employers look to get their usual payroll out before the holiday period.

Accountants who help the self-employed also have some National Insurance changes too sort, but these don’t go into effect until the new tax year in April. Hunt announced the abolition of Class 2 National Insurance and a shift in Class 4 rate from 9% to 8%. This move is anticipated to save the average self-employed individual £350 annually. 

Full expensing

Hunt has also confirmed something many in the business sector have been calling for – full expensing for business investment. 

Full expensing allows businesses to write off the cost of certain capital investment against their taxable profits, thus reducing their overall tax liability. It is already in place temporarily, but Hunt confirmed it will stay going forwards.

While most accountants will already be familiar with this feature of the tax system, it’s likely that the news of it being made permanent will induce some more businesses to consider investment – and may ask you for advice on exactly what kind of spending can be expensed and what cannot.

Getting ready for living wage hike

Hunt also announced that the National Living Wage will rise by 10% to £11.44 an hour from April. The living wage will also apply to those aged 21 and over instead of 23 and over. This will be quite a big change for businesses that hire a lot of young people like shops and cafes – they will need advice on how to implement the change.

Payroll teams will also have to make sure that any employees getting benefits through salary sacrifice schemes don’t accidentally fall below the new minimum rate. With a large enough salary sacrifice outgoing – say for a car – it is not that difficult for this to happen accidentally.

Good cloud-based software such as Employment Hero should make sure you can get this to-do list done rapidly, without waiting for patches or updates to make sure you are compliant. You’ll never be on the wrong version of the software and with HR and pay information all in one place you should never have to double-handle any data either.

With the list done, hopefully you can relax and take a week or so off. You’ll need the rest.

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