Payroll Update 2023-24 Tax Year

As we are approaching the new tax year, enclosed is a brief overview of news and a few reminders from a payroll perspective in the key areas that will affect your business.

Tax & National Insurance Thresholds

HMRC have confirmed the standard personal allowance for 2023/24 will not change and will remain at £12,570. This has been frozen for an additional 2 years until 2027/28.

There is also no change to the thresholds at which national insurance is due. This remains at £9,100 for employers and £12,570 inline with the tax threshold for employees.

Minimum Wage

New rates apply from 1 April 2023. If any wages need increasing due to these changes, please inform your payroll contact: –

Apprenticeship Levy and connected companies

If you have connected companies that together the pay bill is £3 million per year, then all companies are liable to pay the apprenticeship levy. You only have one apprenticeship allowance of £15,000, but you can split the levy over the different entities. The levy is calculated on each payroll individually and dependant on how the levy allowance has been distributed will affect how much each connected company will pay. If this applies, do let your payroll contact know how it should be allocated.

Employment Allowance

Employers’ can claim employment allowance currently £5,000 per annum, which is offset against any secondary class 1 national insurance that is due.

The allowance is limited to businesses and charities, as well as connected companies with a Class 1 national insurance liability in the previous tax year of £100k or less.

In addition, the employment allowance is operated as de Minimis State aid. In these circumstances, employers must have space to accommodate the full £5k employment allowance within their relevant de minims limit. Full details of the criteria can be found on the attached link: –

https://www.gov.uk/claim-employment-allowance/eligibility

If you think you may be entitled to the allowance, speak to your payroll contact if you want to claim for 23/24.

National Insurance Exemptions

• Veterans National Insurance Holiday – came into effect from 6 April 2021 and provides employer national insurance relief on the wages of veterans in their first 12 months of civilian employment up to the upper threshold.
• Freeports National Insurance Holiday – came into effect from 6 April 22 and will provisionally end in April 2026. This provides employer national insurance relief on the wages of new freeport employees up £25,000 per annum. At the start of employment, the employer must expect that at least 60% of the employees working time will be spent at a single freeport site and new NI categories are in place to facilitate this. Liverpool is one of confirmed freeport areas.
• Apprentice National Insurance Relief – available to employers if an apprentice is under 25, on an approved UK government apprenticeship and earns less than £967 per week. If using this relief, your payroll contact must be advised once the apprenticeship ends to avoid any underpayments.
• Investment Zones – In the Spring 2023 budget, it was confirmed that 12 new investment zones will be launched across the UK. Liverpool is one of these areas. There will be employer National Insurance (NI) savings within those investment zones and we will provide further guidance once available. The Investment Zone Policy Prospectus however, does state that for 36 months, eligible employers will pay a zero-rate of employer NICs on any new employee working at the site for at least 60% of their time on earnings up to £25,000 per annum.

HMRC PAYMENTS – PAYING PAYE BY DIRECT DEBIT

The interest charge rate for overdue payment of PAYE has recently increased to 6.5% by HMRC.

To avoid missing the payment deadline, there is now an added function so employers’ can pay their PAYE liabilities by direct debit. You only need to set this up once and payment will be automatically collected going forward.

This is restricted to employers only and there is no scope for agents to do this on your behalf.

HOW CAN YOU SIGN UP FOR THIS?

This service can be access through Pay employers’ PAYE or through the business tax account dashboard.

A new link ‘Set up Direct Debit’ has been introduced and this allows customers to authorise HMRC to collect payment based on their return submissions.

Payment will be collected: –

• shortly after the 22nd of the month or
• 4 working days after you file the return (if you file it after the 19th of the month)

HMRC will tell you the date and amount no later than 3 working days before the payment is collected. The payments will show on your bank statement as ‘HMRC SDDS.’

If signed up to variable payment plan, the following charges will be collected on receipt of the returns to HMRC: –

• Full Payment Submission
• Employer Payment Summary
• Construction Industry Scheme
• Apprenticeship Levy
• Class 1A National Insurance
• Earlier Year Update

Once setup, the link will change to ‘Manage your Direct Debit’ and employers’ can view, change, or cancel the direct debit online.

Salary Sacrifice

A salary sacrifice arrangement can increase an employee’s net pay, as well as reducing the amount of National Insurance employers have to pay.

Employees agree to forego part of their salary in return for non-cash benefits which can enable tax and national insurance savings to be made.

Since April 2017 HMRC have restricted what can be offered via salary sacrifice but examples that can be effective are pensions, ultra-low emission cars, cycle to work schemes, holiday purchase schemes.

If you are interested in implementing a salary sacrifice scheme, do get in touch for further advice.

Holiday Pay

There has been a number of employment law cases over recent years in relation to holiday pay so important to get this right to avoid backdated claims. For those staff on fixed hours and pay then a week’s holiday pay is simply the equivalent of a week’s wages.

For those staff with variable hours, then since 6 April 2020 the pay reference period for calculating holiday pay should be based on the previous 52 weeks paid. If your employees earn commission, bonus, overtime, or any other additional payments they receive on a regular basis, then you need to consider if they should be included in this calculation. Employment Law advice may be required if you are unsure of your contractual obligations.

Pension Re-enrolment & Declaration of Compliance

Automatic re-enrolment occurs every 3 years and is similar to the duties conducted at your pension staging date. Employees must be assessed and re-enrolled into the pension scheme if applicable. In addition, employers have an obligation to complete a Declaration of Compliance, this needs to be submitted no later than 5 months after your re-enrolment date. You will be fined if you fail to complete this accurately and on time.

Your payroll contact can provide a quote for processing the Declaration on your behalf or you can complete this via the attached link.

https://www.thepensionsregulator.gov.uk/en/employers/re-enrolment

If you would like any further information, please get in touch.