The new tax year 2023/24 has arrived bringing a number of payroll-specific changes that businesses should be aware of. These are summarised below:
- The threshold for the additional rate of income tax is lowered in Scotland, Wales, England & Northern Ireland.
- The Apprenticeship Levy rate, allowance and pay bill threshold all remain unchanged.
- A small increase will apply across the main Statutory Payments in 2023/24.
- National Living Wage increases apply with the adult rate increasing to £10.42 per hour and the rate for 21-22 year olds increasing to £10.18.
- National Insurance rates and thresholds remain as those set in November 2022. Note that for the 2022/23 year, due to the changes in rates that took place in July and November 2022, directors will see a blended rate of national insurance applied when the annual recalculation is performed. The rates are 14.53% employer and 12.73% & 2.73% employee.
- The personal allowance remains unchanged at £12,570.
- The Employment Allowance remains unchanged at £5,000 per annum.
For more detailed information here is the link to HMRC’s full guidance: Rates and thresholds for employers 2023 to 2024
National Living Wage
The top National Living Wage rate has increased by 9.7%, from £9.50 to £10.42 per hour. This rate applies to employees aged 23 and over.
National Minimum Wage
The National Minimum Wage has increased:
- 10.9% increase for 21 to 22-year-olds: from £9.18 to £10.18 an hour
- 9.7% increase for 18 to 20-year-olds: from £6.83 to £7.49 an hour
- 9.7% increase for 16 to 17-year-olds and apprentices: from £4.81 to £5.28 an hour.
NMW is easy to calculate for hourly paid employees, but careful consideration needs to be given to those receiving an annual salary, paid per task etc.
National Insurance Thresholds and Rates
The National Insurance contributions (NIC) thresholds and class 1 rates have been frozen until 2028 at its current rate of £9,100 annually.
This will increase employment costs for eligible employers with employer NICs over £5,000 yearly.
The employment allowance remains at £5,000 for 2023/24 to protect 40% of businesses from paying NICs.
The government has put in measures designed to encourage individuals to remain in work longer before they retire.
From 6 April 2023:
- The annual pension allowance—the amount you can contribute to your private pension in a year without incurring tax—has been increased from £40k to £60k. Until now, this had remained unchanged.
- The pension lifetime allowance of £1.07m has been scrapped, meaning individuals can make unlimited contributions to their pensions without incurring a tax charge.
Statutory Sick Pay
The weekly rate of Statutory Sick Pay for the 2023/24 tax year is £109.40.
The same weekly Statutory Sick Pay rate applies to all employees. However, the amount you must pay an employee for each day they’re off work due to illness (the daily rate) depends on the number of ‘qualifying days’ they work each week.
Employers should note that statutory sick pay costs are not recoverable from HMRC.
Statutory Paternity Pay
The weekly rate of Statutory Paternity Pay for the 2023/24 tax year is £172.48 or 90 % of pay, whichever is lower.
92% is recoverable if the employee and employer’s total Class 1 National Insurance payment to HMRC is above £45,000 for the previous tax year. 103% is recoverable if the employer’s total Class 1 National Insurance for the previous tax year is £45,000 or lower.
Statutory Maternity Pay
90% of the employee’s average weekly earnings for the first 6 weeks, then
£172.48 or 90% of pay, whichever is lower for the remaining weeks (up to a further 33 weeks)
As above for statutory paternity pay 92% is recoverable if the employee and employer’s total Class 1 National Insurance payment to HMRC is above £45,000 for the previous tax year. 103% is recoverable if the employer’s total Class 1 National Insurance for the previous tax year is £45,000 or lower.
The Department of Works & Pensions (DWP) has announced the annual thresholds for the 2023/24 tax year remain unchanged from those applying in the 2022/23 tax year.
Contribution rates for employers and employees, where the minimum for a qualifying pension scheme in 2023/24 remains at 8% total contributions (including tax relief) on relevant earnings, of which at least 3% is from the employer.
How Everett King can help
Understanding statutory legislation and payroll requirements can be challenging. If you are a business currently employing staff you also need to understand you auto-enrolment obligations to be HMRC compliant. At Everett King, we have a team that are expert on all things payroll related. Why not give us a call to find out more about how we can support your business and take the stress of payroll management away from you?