Sep 2022
28
Mini budget reveals big changes for payroll
On the 18th of October 2022, there was an announced reversal of some of the measures previously outlined in September's mini-budget.
The new chancellor, Jeremy Hunt, has made changes to the mini-budget, ahead of the medium-term fiscal plan at the end of October. Hunt will be reversing almost all of the tax cuts, that the previous chancellor, Kwasi Kwarteng, announced in September. Hunt stated that stability is the objective and that this new approach will cost taxpayers much less than originally planned.
Whether you’re an accountant, payroll bureau, business owner or payroll professional, you’re probably wondering what effect this will have on how you run payroll.
Below, we’ve listed the changes which will most affect payroll processors and what steps, if any, you need to take to implement these changes.
1. Income tax stays the same
The reduction of the basic rate of income tax by 1% will be scrapped ‘indefinitely’, and so will remain at 20%.
What do I need to do?
No action from payroll processors is required.
2. Health & Social Care Levy scrapped
- The planned abolishment of the Health and Social Care Levy will go ahead as planned. From 6th November 2022, the temporary increase to National Insurance (NI) contributions will end and the rates which were applicable in the 2021/22 tax year will apply once again.
- The 1.25% Health and Social Care Levy will no longer come into force next year.
- Those who pay National Insurance on an annual basis will pay a blended rate of NI for the 2022/23 tax year to take into accountant the changes in NI rates throughout the year.
The blended rates are as follows:
| National Insurance Class | Main rate | Additional rate |
| Directors | 12.73% | 2.73% |
| Class 1A and 1B | 14.53% | N/A |
| Class 4 | 9.73% | 2.73% |
What do I need to do?
The new rates will mean that payroll software providers will need to update their software from November 6th to account for these changes.
3. IR35 rules to remain the same
It was previously announced that rules regarding off-payroll working would return to what they were pre-2017, however this is now no longer the case. The reform, which would have cost £2bn a year, has now been cancelled and IR35 rules will remain the same.
What do I need to do?
No action from payroll processors is required.
4. Retained EU Law (Revocation and Reform) Bill
The Retained EU Law (Revocation and Reform) Bill is a new bill which will end all EU retained laws by 31st December 2023 to make way for new regulations, tailor-made for the UK.
What do I need to do?
This bill could potentially have massive implications for UK employment law, so it is one to watch in the coming year.
Further changes to the mini-budget
Hunt introduced other changes to the mini-budget, which included:
- The universal help on energy prices will only apply for six months, until April 2023 (instead of the two years that it was originally intended for)
- There will be no rise in corporation tax
- The basic rate of income tax will remain at 20%
- No cuts on dividend tax rates
- New VAT-free shopping for overseas visitors will no longer be going ahead
- There will be no freeze on alcohol duty rates
Related articles:
Jun 2022
27
NI Threshold increases on 6th July: What to do
It can be difficult to keep on top of payroll updates and changes to compliance. Using a payroll software which takes care of these updates for you can save you a lot of time in the long run. Thankfully, BrightPay Payroll Software is updated to cater for all regulatory changes to ensure you stay compliant. This will save you time and eliminate the headache that comes with manually processing payroll.
The UK Government announced in March that the National Insurance thresholds will increase from 6th July, this means that employees and self-employed people will pay National Insurance contributions on less of their income or profits. HMRC has made clear that all payroll software providers must ensure that their software is updated to reflect these increased NI thresholds. If your payroll software is not up-to-date, HMRC requests that you do not run your payroll until your payroll software has taken account of the changes.
What changes were made to National Insurance Contribution rates?
National Insurance Contribution rates were increased for the 2022/23 tax year by 1.25%. Contributions are to go towards the NHS, health, and social care.
Who is affected by these changes?
Any person over 16 years old who is employed and earns above £190 a week or any person who is self-employed and makes a profit of £6,725 or more a year, will be affected.
If you are a married woman or widowed (with a valid certification of election) or if you’re deferring National Insurance because you have more than one job, you will pay less National Insurance Contributions.
If you earn between £123 and £190 per week, your contributions are treated as having been paid to protect your National Insurance record.
What are the National Insurance thresholds?
Below are the monthly thresholds for employers and employees who fall into the Class 1 category.
| £ per month | 6 July 2022 to 5 April 2023 | 6 April 2022 to 5 July 2022 |
| Lower Earnings Limit (LEL) Employees do not pay National Insurance but get the benefits of paying |
£533 | £533 |
| Primary Threshold (PT) Employees start paying National Insurance |
£1,048 | £823 |
| Secondary Threshold (ST) Employers start paying National Insurance |
£758 | £758 |
| Upper Earnings Limit (UEL) All employees pay a lower rate of National Insurance above this point |
£4,189 | £4,189 |
| Upper Secondary Threshold (UST) Employers of employees who are under 21 pay zero rate up to this point |
£4,189 | £4,189 |
| Apprentice Upper Secondary Threshold (AUST) Employers of certain apprentices who are under 25 pay zero rate up to this point |
£4,189 | £4,189 |
| Freeports Upper Secondary Threshold (FUST) Employers of qualifying employees working in a freeport site pay zero rate up to this point |
£2,083 | £4,189 |
| Veterans Upper Secondary Threshold (VUST) Employers of qualifying employees pay zero rate up to this point |
£4,189 | £2,083 |
If you fall into Class 2, 3 or 4, check out gov.uk, to learn more.
How to pay NIC’s
If you’re employed, your employer will deduct NIC from your wages before you get paid, your payslip will show your contributions made.
If you’re self-employed, you must pay Class 2 and Class 4 National Insurance, depending on how much profit you make. Most people pay for this through Self-Assessment or through their payroll software. If you make less than £6,725 profit a year or have a specific job, you may be able to pay voluntary contributions to avoid gaps in your National Insurance record, as gaps can affect your State Pension.
If you’re employed and self-employed, your employer will deduct your Class 1 National Insurance from your wages, and you must pay Class 2 and Class 4 National Insurance for your self-employed job. Depending on your combined wages, it will depend on how much National Insurance you will pay.
If you are using the most up-to-date version of BrightPay, these new thresholds have been implemented in the software. To learn more about how BrightPay can help your business stay compliant, book a free 15-minute demonstration today.
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Sep 2021
10
How is payroll impacted by the new national insurance levy?
On Tuesday, the Prime Minister announced a 1.25% health and social care levy on earned income, which will come into effect in April 2022. Speaking to the House of Commons, Boris Johnson declared that this additional levy was required in order to raise funds for health and social care across the UK.
Speaking about the National Health Service, the Prime Minster said “Covid has put enormous pressure on the NHS” and in order to not only “tackle Covid backlogs” but to also reform an already struggling service, a record investment would be required. The additional levy is expected to raise £36 billion over three years.
How will the new health and social care levy be introduced?
In April 2022, the 1.25% levy will be raised via a temporary increase to the National Insurance Contributions (NICs). This will impact Class 1 (employee and employer), Class 1A, Class 1B, and Class 4 (self-employed). In April 2023, the NI will revert back to its current rates and the health and social care levy will be separated out on its own.
Who will be affected by the 1.25% levy?
The new levy will then be paid by all working adults and will also include those above the state pension age who are still working. The exception is those earning less than £9,564 a year or £797 a month, who don't pay National Insurance and won't have to pay the new levy.
How has dividend tax been affected?
The Prime Minister also announced on Tuesday that dividend tax would rise from 2022 by 1.25% to help cover the costs of the social care package. This will not affect shares held in tax-exempt savings accounts, known as ISAs. The £2,000 tax-free allowance for dividend income will also remain unaffected.
What does this mean for payroll?
As typical with any changes to legislation, BrightPay payroll software will be updated to apply the new rates to your employees' earnings. This will first be reflected on an employee’s payslip with an increase to their NIC deduction, and then in April 2023 the new levy will be introduced as a separate deduction on the payslip.
Discover more:
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May 2017
29
Hiring An Apprentice:
If you are considering employing an apprentice there are some things you should know:
- An apprentice will be aged 16 or over
- An apprentice must be paid at least the minimum wage for their age
- An apprentice must work with experienced staff, learn job specific skills and study for a work based qualification during the working week
- An apprentice must work for at least 16 hours per week and will usually work for 30 hours
- An apprentice must be paid for time spent training or studying
- An apprentice must be provided with the same conditions as other employees i.e. paid holiday, sick pay and any benefits such as childcare voucher schemes.
If you employ an apprentice you may be eligible for an apprenticeship grant of £1,500 if you have less than 50 employees and your apprentice is aged between 16 and 24.
If you are providing the training you can apply for training funding to cover some or all of the training costs. Further information is available on the HMRC website.
Employers who have an apprentice will not be required to pay employers National Insurance Contributions (NICs) on their earnings if they are under 25, earning below £45,000 and on an approved UK government apprenticeship. National Insurance category ‘H’ is to be used for apprentices under 25 in qualifying circumstances.
Dec 2014
30
The Top 5 Payroll Software and other changes for 2015-16
A range of employment changes are set to come into effect in 2015. Employers need to familiarise themselves with these changes to ensure they are processing payroll correctly.
Some of the most significant changes to be aware of include:
1. Family Friendly Changes
a. Shared Parental Leave & Pay
This is brand new legislation which will apply to parents with babies due to be born/placed for adoption on or after 5th April 2015. Eligible parents will have the flexibility to share statutory leave and statutory pay in the child’s first year. Under the legislation, leave and pay may be taken in discontinuous blocks, and also both parents may take leave and be in receipt of statutory pay at the same time. Whilst using payroll software will ease the burden of processing shared parental leave and pay, there is a rigorous application process that must be completed by employees. To be sure you are ready, employers are well advised to familiarise themselves with the regulations early. Further details are available here.
b. Changes to Statutory Adoption Leave & Pay
From 5 April 2015 there will be no service requirement in order for employees to be eligible to take adoptive leave. Additionally, from 5 April 2015 the Statutory Adoption Pay rates will increase; the first 6 weeks will be paid at 90% of average weekly earnings. After that SAP will be paid at the lower of either the weekly standard rate or 90% of average weekly earnings. This will mirror the Statutory Maternity Pay rates.
Finally, primary adopters will now be entitled to paid time off to attend up to five adoption appointments.
c. Rise of child’s age limit for parental leave
The current right to take 18 weeks’ unpaid parental leave before a child’s 5th birthday is to be extended from 5 April 2015, so that leave can be taken up to the child’s 18th birthday.
2. Automatic Enrolment
Auto Enrolment will continue to be rolled out to all employers. Every UK employer has a date on which workplace pensions automatic enrolment applies to them, i.e. a staging date. For most employers that had between 30 and 58 staff on 1st April 2012 their staging date will be during 2015. However staging dates can vary, so employers are well advised to check out their staging date on the Pensions Regulator site http://www.thepensionsregulator.gov.uk/employers/tools/staging-date.aspx
3. New Fit for Work Service
Due to be rolled out during the year, the Fit for Work Service will offer employers access to free occupational assistance for employees who have been off sick for four weeks or more. Employers will also be able to claim up to £500 tax relief on payments for medical treatment for their employees where the treatment has been recommended under the new scheme.
4. Statutory Pay Rates
The usual shifts in statutory rates of pay are scheduled for 2015. Rates for statutory maternity, paternity, and adoption pay will increase from 5 April 2015, as too will statutory sick pay rates. Any changes to the national minimum wage rates will be effective from 1 October 2015.
5. NIC and Under 21s
The abolition of employer NICs for Under 21s comes in to effect from 6th April 2015. Employers will not be required to pay Class 1 secondary NICs on earnings up to £815 per week, for employees who are under the age of 21. Class 1 secondary NICs will continue to be payable on all earnings in excess of £815 per week. This could result in savings to an employer of up to £90 per week for hiring an employee who is under 21!
Dec 2014
4
Chancellor announces abolition of Employer National Insurance Contributions for employees under 21 in 2015.
George Osborne revealed the reduction, designed to reduce levels of youth unemployment, alongside other announcements that will affect employers – including an earlier than expected increase in the state pension age and more accessible funding for apprenticeships available directly from HM Revenue & Customs (HMRC).
The removal of employers’ national insurance (NI) contributions for under-21s in April 2015 will follow the introduction of the £2,000 “employment allowance” that comes into force next April. Higher-rate tax payers who are under 21, earning £813 per week or more, will still attract employer NI contributions.
“Employer NI contributions will be removed altogether on a million and a half jobs for young people. We’re not going to leave young people behind as the economy grows,” said Osborne. “We are going to have a responsible recovery for all.”
Nov 2014
20
Important National Insurance changes from 6 April 2016
The Department for Work and Pensions has published new guidance for both employers and employees on the ending of contracting-out of the additional State Pension.
This guidance explains the changes being made to the State Pension for people who will reach State Pension age on or after 6 April 2016.
If you are one of the 2,500 private sector employers who offer a salary related pension scheme, your employees are likely to be “contracted-out” of the additional State Pension. If so, you and your employee may pay National Insurance contributions at a lower rate because you get a National Insurance rebate.
On the 6 April 2016, the new State Pension will replace the existing basic and additional State Pension and will bring to an end contracting-out and the National Insurance rebate.
This means that from April 2016, you and your employees will pay the standard rate of National Insurance contributions instead of the contracted-out rate. For employers, the standard rate of National Insurance is 13.8% of all earnings above the secondary threshold for all employees and they will no longer receive the 3.4% National Insurance rebate.
The 1.4% National Insurance rebate for those employees in contracted-out schemes will also end. This means employees will pay the standard rate of National Insurance instead of a lower rate.
Employers who currently offer a salary related pension scheme and who will be affected by the changes are advised to speak to their pension advisor or scheme trustees to explore possible options available to them before the changes are brought in.
The Department for Work and Pensions’ guidance on this topic can be found at:
Sep 2014
25
Are you claiming your employment allowance correctly?
In April of 2014 the UK Government introduced the Employment Allowance Scheme. This scheme offers businesses and charities a reduction of up to £2000 (max for tax year 14/15) in the amount of employer Class 1 National Insurance contributions (NICS) they have to pay every year from 6th April 2014.
Once employers process their first month’s payroll in April they are required to send an EPS (employment payment summary) to say that you as an employer are going to claim the employment allowance for 14/15. A lot of companies seem to be allowing for the employment allowance scheme in calculating the NI bill for HMRC but have not sent through their EPS which informs the HMRC that the company is taking advantage of the Employment Allowance scheme.
HMRC have announced that they will now issue generic notifications (otherwise known as GNS messages) to employers who may have failed to claim the Employment Allowance.
The intention behind these notifications is to encourage PAYE schemes to check eligibility and to claim their Employment Allowance. HMRC explain that the new notification may be sent to any PAYE scheme which has not so far submitted an Employment Summary in 14/15. HMRC anticipate that these notifications will not be issued before 25th September.
Mar 2014
19
HMRC's employment allowance calculator
Through the new Employment Allowance employers can reduce the amount of NIC they pay for their employees by up to £2,000.
An online calculator is now available for employers to see the effect the new Employment Allowance could have on their National Insurance Contributions bill.
http://www.employmentallowance.com/allowance-calculator/
The new Employment Allowance can be claimed from 6 April 2014. You are not required to pay any employer National Insurance Contributions if you pay less than £2,000 a year.
It is estimated up to 1.25 million businesses and charities will benefit from Employment Allowance, with 450,000 businesses and charities not required to pay any Employer NIC at all.
Eligibility
Employment Allowance is for nearly all employers that pay Class 1 National Insurance contributions on their employees’ and directors’ earnings. This includes:
• Businesses
• Charities
• Community Amateur Sports Clubs
Mar 2014
6
Withdrawal of National Insurance Number Tracing Service
HM Revenue & Customs (HMRC) will withdraw the CA6855 clerical tracing service on 31 March 2014.
This is following the introduction of reporting PAYE in real time and the National Insurance number verification request service (NVR).
If you are not yet reporting PAYE in real time yet and need to use this service you should do so now.
If you are reporting PAYE in real time but you have not used the NVR service you should read the guidance 'Check an employee's National Insurance number' that can be found in the guide 'Making sure you use the correct National Insurance Number'.
BrightPay includes the NVR request among its list of RTI functions.
