The new NLW rate for 2024/25, which has been announced at a higher level than originally proposed

Source: Gov.UK CPI based on September in year

What gets revealed either side of a fiscal statement can often throw a light on measures that the Treasury find awkward to include in the main presentation. The announcement on the day before the Autumn Statement of the 2024/25 National Living Wage (NLW) and National Minimum Wage (NMW) rates is a case in point.

As we noted in an earlier Bulletin, the Chancellor had trailed in October that the NLW rate would rise to over £11 an hour (from the current £10.42) as well as being extended down to 21 year olds (from the current 23 minimum age). Yesterday’s announcement revealed a figure well over £11 and 1p above the top of the band proposed by the Low Pay Commission back in March. The new rates are:

Rate	From 1/4/2024	From 1/4/2023	Increase
	£ per hour		(%)
NLW Age 21* + above	11.44	10.42	9.8
NMW Age 21-22*	N/A	10.18	12.4*
NMW Age 18-20	8.60	7.49	14.8
NMW Age 16-17	6.40	5.28	21.2
Apprentice rate	6.40	5.28	21.2

* NLW applies from age 21 from 1/4/2024, previously 23

The 9.8% NLW increase is well above the current rate of inflation (4.6% CPI in October 2023) and comfortably exceeds the latest Office for National Statistics (ONS) earnings growth figures for July-September of 7.9% (including bonuses) and 7.7% (excluding bonuses). The size of the rise is driven by the Government’s longstanding goal to bring the NLW up to two thirds of median earnings by April 2024 for workers aged over 21. This also explains the jumps in the NMW for those under age 21, bringing them closer to the NLW level they will eventually move into.

The large increases are something of a problem for the Chancellor:

• It was not so long ago that Mr Hunt was saying that pay rises above inflation would be a ‘terrible mistake’ and fuel inflation.
• On the day that the NLW announcement was made, the Governor of the Bank of England told the Treasury Committee that wage growth remained too high, creating an upside risk to inflation. Of late, Mr Hunt (and his boss) have focussed on their ‘success’ in halving inflation in 2023.
• The sharp jump in the NLW will directly benefit 2.7m employees and indirectly benefit many more – a £1.02 an hour increase will ripple some way up through wage scales. That will add to business (and Government) costs, potentially countering the increased investment Mr Hunt wishes to encourage via his widely anticipated ‘full expensing’ extension.
• A 10%ish NLW rise contrasts awkwardly with the likely continued freeze in the personal allowance.
• Similarly, the NLW rise may shine an unfavourable light on benefit increases, particularly if working benefits are linked to October 4.6% CPI, as has been rumoured.
  

Comment

The 2024/25 NLW equates to £20,821 a year, based on a 35-hour week. That is a number worth remembering when the New State Pension, assuming a (far from certain) 8.5% increase, will be £11,502…   

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With fractional shares, rather than owning a share in a company, individuals own fractions of one or more shares. This could be useful, where, for example, a whole share would cost more than the £20,000 annual ISA subscription.

The emergence of fractional shares post-dates the ISA regulations. However, HMRC recently issued a definitive answer on the topic of differential shares in ISAs, by way of its tax-free savings newsletter published on 9 October 2023.

According to HMRC, a fraction of a share is not a share and therefore cannot be held in ISAs. ‘Shares’, as referred to in paragraph 7(2)(a) of the ISA Regulations, refers only to whole shares and not parts or derivatives thereof. A fraction of a share does not give the investor the same legal rights as a whole share does. Fractional shares could only qualify for inclusion in ISAs if the ISA Regulations were amended to allow them.

HMRC’s newsletter goes on to say that, where fractional shares are an underlying investment in a collective investment scheme or fund (for example an exchange traded fund), they are not subject to the same restrictions.

HMRC says that any ISA managers who allow fractional shares to be purchased or held within their ISAs as a qualifying investment under Regulation 7(2)(a) should contact HMRC by email at savings.compliance@hmrc.gov.uk.

However, it appears that, this update has caused some controversy, with disagreement in some parts over HMRC’s interpretation of the consolidated version of The Individual Savings Account Regulations 1998 (SI 1998 No. 1870). According to AccountingWEB, Dan Neidle, a regular contributor to their site, has since “set out his own stall”, as to why he believes that HMRC is probably wrong. Please see here.

Whether such an investment is in fact legal or not, since HMRC has published its own view, it’s unlikely that an investor would want to take a chance on including fractional shares in their ISA in the knowledge that this would be open to challenge.

It’s quite possible that HMRC will seek to settle the matter via the courts. However, that will take time, and that might mean investors facing uncertainty regarding their entitlement to tax relief on the fractional shares in question until some time late in the current decade.

Or, maybe, Jeremy Hunt will look to resolve this once and for all, in the upcoming Autumn Statement, by arranging for some suitable wording to be included in the current ISA regulations, either to make it clear that that fractional shares can’t be held in an ISA, or, perhaps, to allow fractional shares to be held in an ISA.

Please look out for information on any developments regarding this in our Autumn Statement analysis which will be published on Techlink on the evening of 22 November 2023.

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The FCA’s new guidance, which is designed to give people a better understanding of what they are investing in, and the risks involved. And a consultation on a new Discussion Paper to help develop the FCA’s regime for fiat-backed stablecoins including when used as a means of payment.

New guidance for crypto firms to help them comply with marketing rules

Following a change in legislation, cryptoassets promotions targeting UK consumers now fall within the FCA’s remit.

Following a consultation, the FCA has published Guidance to further support crypto firms complying with the new marketing rules. The Guidance also details how authorised firms communicating or approving financial promotions should apply the Consumer Duty to their marketing.  

To further support firms make necessary improvements to their marketing, the FCA previously published examples of good and poor practice on firms’ preparations for the new financial promotions rules. 

It says that it continues to remind people that despite these new rules, cryptoassets remain high-risk and people should be prepared to lose all the money they invest. 

Consumers should check the Warning List before making any investment in cryptoassets. The list is intended to help consumers make more informed investment decisions by finding details of unauthorised firms the FCA is aware of. It should also help consumers understand which firms may be providing or promoting financial services or products in the UK without the FCA’s permission. 

New Discussion Paper

The Treasury’s recent Policy Statement sets out their intention to define fiat-backed stablecoins in legislation, expecting it to capture those stablecoins which seek to maintain a stable value by reference to a fiat currency, and hold (in part or wholly) currency as ‘backing’. Please see our earlier Bulletin.

The Treasury is also considering making changes to the payments legislation to enable retail payments for goods and services to be made using fiat-backed stablecoins. This includes an option the Treasury are exploring to allow certain stablecoins which are issued outside of the UK (overseas stablecoins) to be used for payments.

The FCA says that its Discussion Paper will be a part of a joint publication package with the Bank of England’s Discussion Paper on systemic payment systems using stablecoins and related services providers, and the Prudential Regulation Authority’s Dear CEO letter on innovative uses of deposits, e-money and stablecoins. To accompany these publications, it is also publishing a joint ‘Roadmap paper’ with the Bank and Prudential Regulation Authority which aims to explain how its proposed regimes interact and its approach for dual regulation. 

This Discussion Paper will interest anyone in the UK who has bought, or may in the future buy, fiat-backed stablecoins. This regime will also interest organisations and individuals that participate in the cryptoasset sector (specifically, cryptoassets that claim a form of stability and make use of a stabilisation mechanism). It will particularly interest:  

• firms or individuals that design, issue or maintain a fiat-backed stablecoin;  
• firms that provide custody for, or safeguarding ownership of, fiat backed stablecoins – or the ‘private keys’ to access them (this will include any entity that takes custody of stablecoin, no matter how briefly, for example an exchange that does so to facilitate a trade);  
• retail payment service providers, which may consider using fiat-backed stablecoins as an alternative means of payment;  
• cryptoasset firms providing services to UK consumers for fiat-backed stablecoins industry groups/trade bodies;  
• professional advisers;  
• consumer groups and individual consumers;  
• policy makers and other regulatory bodies; 
• industry experts and commentators;  
• academics and think tanks.

The FCA has asked for feedback by 6 February 2024. It will consider feedback to decide its next steps and it will consult on any proposals in this Discussion Paper if it proposes to adopt them as part of its final rules.

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