Navigating the Spring Budget: An HR Perspective

On 6th March 2024, the Chancellor of the Exchequer Jeremy Hunt delivered his Spring Budget.

We, of course, watched the Budget from the perspective of how it will be felt by our clients, and in turn, how their employees might feel about some of the specific changes.

Hunt said the Budget would mean “more investment, more jobs, better public services and lower taxes in a budget for long-term growth”.

Let’s dive into the key HR takeaways from this year’s Spring Budget that employers and people managers need to know.

National Insurance Cut

From 6 April 2024, employee National Insurance contributions will be cut by 2p, reducing the contribution rate from 10 per cent to 8 per cent. Self-employed workers will see this reduced from 8 per cent to 6 per cent.

This reduction comes on top of the 2p cut in the autumn statement, which reduced the rate from 12 per cent to 10 per cent.

The heavily trialled cut in National Insurance contribution will generally feel welcome for a lot of employed people, but at the same time, that will push a percentage of employees into paying higher taxes, so some businesses may find their staff seeking conversations around this area.

Extra Support for Working Parents

One area which has always been contentious has been the issue of whether ‘whole household income’ is taken into account for Child Benefit, and, notably, this is now being looked at due to the “unfairness” highlighted by the Chancellor.

Currently, a household with two working parents each earning £49,000 a year will receive child benefits in full, but a household with one parent earning more than £50,000 will not see the same benefits. This is now in consultation and will be moved to a household-based system in 2026.

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From April 2024, the threshold at which parents start paying the high-income child benefit charge will increase from £50,000 to £60,000 – a welcomed increase from the Chancellor providing more support to working families and to help support the balance of childcare and work. This threshold has not seen an increase since 2013.

This sits alongside the Chancellor announcing an increase to the hours of available free childcare, which will again make it even easier for clients like ours – and a business such as MAD-HR – to attract and retain parents who can achieve more balance and be rewarded at the same time.

The struggle to find affordable childcare means working mothers are frequently forced to reduce their working hours or stop working altogether. This is, in turn, a major contributing factor to the UK’s ongoing gender pay gap problem.

Pension Fund Reforms

Pension funds will be required to publicly compare their performance data against competitor schemes, and schemes that are performing poorly for savers will not be allowed to take on new business from employers.

The announcement follows reforms in the Autumn Budget to triple-lock pensions, with the state pension set to increase by 8.5 per cent in April. This was the second biggest-ever rise in the state pension.

“We’ll continue to explore how savers could be allowed to take their pension pots with them when they change jobs,” Hunt added.

Support for people to get into work

Hunt announced that the government is extending the duration of the Additional Jobcentre Support pilot across England and Scotland for a further 12 months.

The pilot that was launched in February 2023 is testing how intensive support at specific points in a universal credit claimant’s journey can help support them into employment or higher earnings.

Changes to the ‘non-dom’ regime

Wednesday’s budget contained some momentous announcements for non-doms.

The key changes are all scheduled to take effect on 6 April 2025 which will be after the next General Election. It is very possible that Labour will take power at that Election so – although the announcements broadly mimic Labour policy – there is a question mark as to how much of this new regime will ever actually become law or whether a Labour Government will make changes to the detail before it is implemented.

If we assume that the new regime will apply in 2025/26 at least, it is important for affected individuals and employers to start planning now as it will affect your attraction strategy as the UK could become a less attractive place to work if they have other income generated from outside their employment in the UK.

The existing income tax and capital gains tax regime for non-doms (the remittance basis) will be abolished for future income and gains arising after 6 April 2025.

• It will be replaced by a new special status which can be claimed during the first four years of tax residency in the UK. Government documents refer to this as the “4-year FIG regime”;
• Individuals who claim the new status will not pay any UK tax on foreign income and gains arising in those four years and can freely bring such funds into the UK without further tax;
• To be eligible, an individual must not have been UK tax resident in any of the 10 tax years preceding the four-year period;
• There will be a number of transitional rules; however, rather than cover the detail of these, if you employ non-UK nationals or are considering doing then we would strongly advise that you seek specialist tax advice.

Summary

It is fair to say that the Chancellor has played it safe and limited himself to minimalistic tax cuts on the individual rather than employers and businesses.

It sorely lacked a broad economic strategy to improve living standards and boost productivity across the economy. This will mean that employers will need to look to ways in which they can invest in skills and improve productivity.

If you need some support in these areas, feel free to reach out to our team.