Potential and unintended employee related consequences of the recent Spring Statement

Whilst some changes relating to employees have been well signposted for the tax year(s) ahead – such as the increase in Employers’ National Insurance Contributions to 15% from 6 April 2025, others have not.

Having changes well signposted is important.

For example, the increase of Employers NIC from 6 April means that companies could ensure they made an informed decision as to when to pay bonuses due for the 2024 financial year.

However, two recent proposed changes may not have been fully digested by businesses.

Firstly, HMRC are planning to increase the tax- free allowance for “informal work” (often referred to as “side-hustles”) from £1,000 to £3,000.

Whilst such an increase acknowledges the cost/benefit ratio of trying to collect tax on such, relatively speaking, small sums – it does not take account of the time or effort that might be needed to create such levels of income.

However, increasing the allowance, may make it more likely that employees would want to devote extra time to these activities now that they are more financially worthwhile.

This is where employers may feel they need to be vigilant – as it may be that some of the extra time will be spent during the working day (however that might be defined).  Whilst many employment contracts prohibit an individual working for another enterprise, the wording may not cover self-employments.  Alternatively, employers may not have considered including the need to manage this position within their employment contract.

Secondly, there is a proposal to introduce a new reward scheme designed to encourage informants to come forward to HMRC about tax fraud.  Whilst we would always encourage compliance with tax legislation, we would also note that such a scheme may be abused by unhappy employees – in that they may be able to submit a claim for the reward supported by low levels of information and evidence but which would tie-up resources to verify and process. The standard of ‘proof’ required should be clear and appropriately high.

It is nonetheless crucial that all businesses make sure that their tax affairs are up to date and that decisions regarding tax structuring are fully planned and recorded internally.

If the above matters resonate and you would like to discuss how MM&K could assist you with developing your approaches in these areas – please contact Stuart James (stuart.james@mm-k.com) in the first instance.

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