October 2024 / United Kingdom

In October 2024, the UK government launched a groundbreaking Employment Rights Bill with changes that promise to reshape the workforce landscape. From pay adjustments and enhanced leave entitlements to new anti-harassment mandates, this Bill is set to bring transformative change across businesses. Here’s a look at what these new standards mean for employers and how to start preparing now.

Building a Fairer Workplace: Key Changes

The Employment Rights Bill is part of the government's commitment to making work fairer and safer, spanning five major areas:

1. Strengthened Protections Against Unfair Dismissal

One of the most notable changes is the shift in unfair dismissal protections, which now apply from day one rather than after two years of employment. However, a probation period will still apply, with the exact length to be determined through consultation. Additionally, the controversial "fire and rehire" practice—where employers dismiss and re-engage staff to alter contract terms—will be largely prohibited, only allowed in cases of dire financial necessity.

2. Pay and Sick Leave Reforms

For the first time, Statutory Sick Pay (SSP) will be available from the first day of illness without any minimum earnings threshold. Large employers with over 250 employees are also now required to establish action plans to address gender pay gaps, moving beyond reporting to take concrete steps toward reducing pay disparities. The Low Pay Commission has also been tasked with setting a single minimum wage for all ages based on the cost of living—a significant shift from previous age-tiered rates.

3. New Time-Off Entitlements

The Bill introduces several essential time-off rights, including bereavement leave from the first day of employment. Parental and paternity leave will also become available immediately for new employees, removing the one-year and 26-week minimum requirements previously in place. Additionally, flexible working is set to become the default, meaning employers must show specific and reasonable grounds for denying flexible work arrangements.

4. Fairer Contracts for Zero-Hour and Low-Hour Workers

Workers on zero-hour and low-hour contracts will benefit from greater security with the right to guaranteed hours contracts based on their average working patterns over a defined period. Employers will also need to give these workers reasonable notice for shifts, along with compensation for last-minute cancellations or schedule changes, adding a layer of predictability for those in non-traditional roles.

5. Expanded Responsibilities for Workplace Equality and Anti-Harassment Measures

The Bill strengthens requirements for employers to prevent workplace harassment, including harassment from third parties, by requiring them to take “all reasonable steps” to ensure safety. For large employers, this duty extends to supporting employees experiencing menopause and creating actionable plans to close gender pay gaps.

What’s Next for Employers?

While the Employment Rights Bill has entered the parliamentary process, its implementation is not expected until 2026. This gives employers time to adapt, but it’s wise to start planning now. Key areas for immediate attention include reassessing contracts, updating HR policies around harassment and leave, and initiating action plans for pay gap reductions.

Employers should also keep an eye on several additional long-term changes proposed by the government, including:

• Right to Disconnect: Employees may soon gain the right to disconnect from work after hours, a crucial development in the era of remote work.
• Carer’s Leave Review: Proposed adjustments aim to better support employees with caregiving responsibilities, adding flexibility and protections.
• Equal Pay for Outsourced Services: Future regulations may prevent employers from using outsourcing to bypass equal pay obligations.

Preparing for a Future-Ready Workplace

The Employment Rights Bill presents employers with both challenges and opportunities to create a more inclusive, equitable, and flexible workplace. Start by reviewing current policies, ensuring HR practices align with the proposed changes, and fostering open communication with employees about their rights and responsibilities.

By embracing these shifts, employers can not only comply with upcoming laws but also attract and retain top talent in a competitive market where workplace culture and fairness are paramount.

The 2024 UK Budget introduced substantial tax changes, targeting capital gains, inheritance tax, non-domicile status, and employer obligations. Chancellor Rachel Reeves’s measures aim to raise £40bn in additional revenue and reflect the government’s commitment to sustainable economic growth through increased public investment. Below, we detail the most relevant tax implications from the Budget, with a focus on Diacron Group clients who may be affected by these shifts.

Capital Gains Tax (CGT) Adjustments

Capital Gains Tax rates have risen sharply, with the basic rate moving from 10% to 18% and the higher rate from 20% to 24%. This change will impact clients holding assets such as shares, second homes, or other investments, potentially reducing after-tax returns on disposals. For clients considering selling significant assets in the near term, Diacron Group recommends re-evaluating tax planning strategies to optimise the timing of disposals and explore any available reliefs, such as Entrepreneurs’ Relief for qualifying business assets. Effective structuring and planning can help mitigate some of the increased CGT burden.

Inheritance Tax (IHT) Changes and Business Asset Considerations

While the inheritance tax threshold remains frozen at £325,000, a 20% IHT rate now applies to assets over £1m, particularly impacting business and agricultural properties. This could significantly affect clients with family businesses or substantial property holdings who intend to pass on wealth to the next generation. Estate and succession planning will be critical for clients with high-value estates to navigate these new tax liabilities. For clients holding significant assets in business property, specific reliefs such as Business Property Relief (BPR) may offer valuable opportunities for IHT mitigation. Diacron Group can assist in evaluating asset portfolios and structuring holdings to reduce the impact of these increased inheritance tax obligations.

Abolition of Non-Domicile Status

The removal of non-domicile (non-dom) tax status from April marks a fundamental shift for many high-net-worth individuals and internationally mobile clients who have relied on this status for tax efficiency. Without the non-dom status, clients who previously shielded foreign income and gains from UK taxation may need to reconsider their residency status, asset locations, and overall tax planning approach. This change will particularly affect long-term UK residents with substantial overseas income and assets. Diacron Group can support clients by identifying alternative residency and holding structures, as well as tax planning strategies that maintain financial flexibility while remaining compliant under the new UK tax framework.

National Insurance and Employment Costs

Employers will see a rise in National Insurance contributions, with the rate increasing by 1.2 percentage points to 15%, and the secondary threshold reduced from £9,100 to £5,000 starting in April. These adjustments are expected to generate £25bn annually and will increase payroll costs across sectors. Companies should assess workforce structures, consider payroll optimisations, and explore tax reliefs to absorb this added expense. Diacron Group’s advisory services can help clients navigate these changes, optimise workforce planning, and identify tax efficiencies to mitigate the impact on cash flow and profitability.

VAT on Private Education and Income Tax Threshold Adjustments

A 20% VAT on private school fees, effective from January 2025, will increase educational expenses for families in private education, while future income tax thresholds will be adjusted for inflation starting in 2028/29. Although the impact of these income tax adjustments will not be immediate, they signal potential increases in personal tax liabilities for higher-income households over the coming years. Clients are encouraged to consider long-term budgeting strategies and cash flow planning to accommodate these changes.

Increased Compliance and Anti-Tax Avoidance Measures

The Budget also outlined a focus on curbing tax avoidance, with measures projected to raise £6.5bn by targeting umbrella companies and other tax arrangements. These stricter compliance requirements indicate that businesses should ensure robust adherence to tax regulations and might benefit from regular internal audits or reviews to stay aligned with the updated rules. For clients concerned about compliance, Diacron Group provides audit services and regulatory advice to pre-empt and address any tax risks posed by these new anti-avoidance measures.

Looking Forward: Preparing for Budget Implications

The Budget’s tax increases and compliance shifts reflect the government’s strategic focus on addressing revenue needs while promoting public investment. Diacron Group advises clients to review and adjust their tax strategies accordingly, taking advantage of available reliefs, structuring options, and timing strategies to manage potential liabilities effectively.

For tailored advice on navigating these changes, contact Diacron Group for a consultation. Our team is ready to provide comprehensive support to ensure compliance, enhance tax efficiency, and optimise financial planning in light of the latest regulatory requirements.

Author: Angelo Chirulli, Tax Advisor Diacron London