Autumn Budget 2024: Employment tax changes and compliance

Double-Cab Pickup Vehicles

The main headline on employee taxation that was slipped into the official Budget documentation after the Chancellor’s speech, is the announcement that employer-provided Double-Cab Pickup Vehicles (DCPUs) over one tonne will no longer be taxed as company vans from 6 April 2025.

DCPUs provided to employees from this date will be taxed as company cars, which will automatically significantly increase the tax burden for the employee and also the National Insurance Contribution (NIC) for the employer. Transitional rules will be in place to protect the tax treatment of DCPUs provided, or ordered, before 6 April 2025 for a maximum period of four years.

Electric Company Cars

It was altogether better news for employees driving electric company cars. Minimal increases to benefit in kind tax charges for such vehicles were confirmed for 2028/29 and 2029/30 rising to a 9% charge by 2029/30 to encourage more drivers shifting to such vehicles. Coupled with the confirmed increases to employer NICs from next tax year, this paves the way for more employers to offer electric cars to staff via salary sacrifice arrangements to achieve significant savings for the employee and the business. Benefit in kind tax charges on hybrid company cars will be more closely aligned with traditional fuelled vehicles to further focus the Government’s support towards electric vehicles.

Umbrella Companies

On the compliance side, it is no surprise the Government is going to legislate to remove non-compliance in the umbrella market – this is where a worker is employed through a third party provider who essentially acts as the employer. HMRC estimates that around £500 million was lost to disguised remuneration tax avoidance schemes in 2022 to 2023 alone, almost all of which was facilitated by umbrella companies. With effect from 6 April 2026, the responsibility to account for PAYE will shift from the umbrella company that employs the worker to the recruitment agency that supplies the worker to the end client. Where there is no agency in a labour supply chain, this responsibility will sit with the end client. The Government believes this measure will prevent tax abuse by making those who can control labour supply chains legally responsible for ensuring that PAYE is properly accounted. Further detail will be published over the coming months on this change.

Employee Car Ownership Schemes

Measures will also be introduced from April 2026 to combat what HMRC perceives to be avoidance in relation to employee car ownership schemes. This will mostly affect employers and employees in the automotive sector.

Tax Compliance

Further announcements on tax compliance activity with a particular relevance to employers include:

1. the investment of an additional 5,000 compliance staff to HMRC with the intention of raising a further £6.5 bn in additional tax revenue per year by 2029-30. We would anticipate a key area for this activity to be on employer compliance given that PAYE and NICs account for the largest proportion of tax revenues for the Government.
2. The appointment of a new Covid Corruption Commissioner to lead work to recover public funds from companies that took unfair advantage of government schemes during the Covid-19 pandemic. Payments for furloughed staff under the Coronavirus Job Retention Scheme may be near the top of the list for the new commissioner.

Budget analysis webinar

On October 31st, we hosted a Budget Analysis webinar, analysing the Chancellor's announcements and the potential consequences for both businesses and individuals.

Watch the Budget Analysis webinar recording