New regulations that prohibit employers from withholding tips for employees in the hospitality, leisure, and services sectors took effect on 1 October 2024. This change follows the enactment of The Employment (Allocation of Tips) Act 2023, commonly referred to as the Tipping Act, along with the statutory Code of Practice on the fair and transparent distribution of tips, which also took effect on 1 October 2024.

This means that more than 2 million workers will have their tips protected. HMRC has estimated that this new law will mean an estimated £200 million a year will go back into the pockets of hard-working staff by retaining tips that would have otherwise been deducted. These new measures apply in England, Scotland and Wales. Employment policy is devolved to Northern Ireland.

Employers who violate these rules could face fines or be required to compensate their staff. Workers will have the ability to hold their employers fully accountable through employment tribunals.

The statutory Code of Practice provides businesses with advice on how tips should be distributed among staff. The Code of Practice is statutory and has legal effect, meaning it can be introduced as evidence in an employment tribunal.

The government has unveiled new measures to support small businesses and the self-employed by tackling the scourge of late payments, which according to the Smart Data Foundry is costing SMEs £22,000 a year on average and according to FSB research, leads to 50,000 business closures a year.

The government will consult on tough new laws which will hold larger firms to account and get cash flowing back into businesses – helping deliver our mission to grow the economy.

In addition, new legislation being brought in the coming weeks will require all large businesses to include payment reporting in their annual reports – putting the onus on them to provide clarity in their annual reports about how they treat small firms. This will mean company boards and international investors will be able to see how firms are operating.

Enforcement will also be stepped up on the existing late payment performance reporting regulations which require large companies to report their payment performance twice yearly on GOV.UK.

Under current laws, responsible directors at non-compliant companies who don’t report their payment practices could face criminal prosecutions including potentially unlimited fines and criminal records.

The consultation which will be launched in the coming months, will also consider a range of further policy measures that could help address poor payment practices.

Research shows that every quarter in 2022, 52% of SMEs small firms in the UK suffer from late payments, meaning roughly 2.8 million small firms face this issue, with the Federation of Small Businesses describing it as one of the biggest problems facing SMEs.

Late payments are just one element of the problem, with some SMEs forced to wait months for contracts to be fulfilled and some are even forced to take out loans against their own homes to manage cash flow.

Cracking down on late payments will unlock growth for 5.5 million small firms by enabling them to invest their time hiring more employees, boosting wages, and exporting around the world, rather than chasing down late payments.

The Business Secretary will hold a joint call with the Federation of Small Businesses later today to outline to SME leaders the work the Department will undertake to put in place tough new laws to end bad payment culture. New proposals, subject to consultation, will be bought forward on audit and audit committees, in order to help rebuild small businesses’ trust that they will be paid on time.

In this post we have outlined a few tax planning options that readers may want to consider following the October Budget changes.

Capital Gains Tax

Landlords will be relieved that the higher residential rate will remain at 24% until at least 5 April 2026. However, where a landlord is planning to sell, it may be prudent to do so while the 24% rate remains available, as beyond April 2026 nothing is guaranteed.

Business Asset Disposal Relief

The present 10% rate of CGT chargeable on qualifying business assets is increasing April 2025 to 14% and to 18% from April 2026.

Accordingly, where the qualifying conditions are met, and a disposal is on the cards, it makes sense to make the disposal prior to 6 April 2025 – saving up to 14% where the higher rate would otherwise apply. 

Landlords with furnished holiday lettings who meet the conditions can also benefit if they dispose of their property within three years from the end of their FHL business. Again, making the disposal sooner rather than later will maximise the impact of BADR. The savings where the gain would otherwise be taxed at the higher rate fall to 10% from April 2025 and to 6% from April 2026.

Employers’ NIC increase

The upper secondary thresholds for under 21s, apprentices, armed forces veterans and new Freeport employers remain unchanged, and employers looking to mitigate their NIC increases (from 13.8% to 15% from April 2025) could consider taking on workers within these groups. 

Taking on two part-time workers rather than one full-time worker will also reduce their NIC bill.

The Class 1A rate and Class 1B rate, which are aligned with the secondary Class 1 rate, also rise to 15% from 6 April 2025. This means that the Class 1A contributions payable on chargeable benefits in kind will increase from 13.8% to 15%.

These employer NIC cost increases will be significant for larger employers and may warrant a recalculation of budgets for the coming year. 

If you need more information regarding any of the budget changes or the above planning options please call so we can consider your options.