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UK Payroll Processing Guide for Tax Year 2023-2024: Key Changes and Dates

As we enter the new tax year, UK-based payroll professionals need to be aware of the changes that will impact their payroll processing. The tax year 2023-2024 brings new legislation and regulations that require careful consideration to ensure compliance with the latest laws.

In this reference guide, we'll discuss all the essential details that payroll managers need to know to ensure they stay up-to-date with the latest changes.

    What are the key dates for the 2023-2024 tax year?

    Before we dive into the legislative changes, it's essential to highlight some critical dates that payroll managers must be aware of. These include:

    • April 6th, 2023: This marks the start of the new tax year, and all new tax codes and rates will come into effect.
    • May 31st, 2023: This is the deadline for submitting your employer annual return (P35 and P14s) for the tax year 2022-2023.
    • July 6th, 2023: This is the deadline for submitting forms P11D, P11D(b), and P9D for the tax year 2022-2023.
    • July 21st, 2023: This is the deadline for paying any Class 1A National Insurance contributions electronically for the tax year 2022-2023.

      What are the changes to National Minimum Wage?

      For pay periods commencing from April 1st, 2023, the National Minimum Wage (NMW) increase across all age bands. The new rates will be as follows:

      • £10.42 per hour for workers aged 23 and over (up from £9.50 in the previous tax year).
      • £10.18 per hour for workers aged 21 to 22 (up from £9.18 in the previous tax year).
      • £7.49 per hour for workers aged 18 to 20 (up from £6.83in the previous tax year).
      • £5.28 per hour for workers aged 16 to 17 (up from £4.82 in the previous tax year).
      • £5.28 per hour for apprentices (up from £4.81 in the previous tax year).

      Employers must ensure that they pay their workers the correct NMW rate, or they risk facing penalties and fines from HM Revenue and Customs (HMRC).

      It is the government’s intention to lower the age threshold for the National Living Wage (NLW) from 23 to 21 by 2024. This means that more workers will be eligible for the higher wage rate, and payroll managers will need to be prepared for this change when it comes into effect.

        What are the changes to income tax thresholds, rates and codes?

        Income Tax for England and Northern Ireland

        The standard employee personal allowance for the 2023 to 2024 tax year is:

        • £242 per week
        • £1,048 per month
        • £12,570 per year

            Income Tax for Scotland

            The standard employee personal allowance for the 2023 to 2024 tax year is:

            • £242 per week
            • £1,048 per month
            • £12,570 per year

                Income Tax for Wales

                The standard employee personal allowance for the 2023 to 2024 tax year is:

                • £242 per week
                • £1,048 per month
                • £12,570 per year

                    What are the emergency tax codes?

                    The emergency tax codes from 6 April 2023 are:

                    • 1257L W1
                    • 1257L M1
                    • 1257L X

                      What are the changes to National Insurance Contributions?

                      The primary threshold for Class 1 National Insurance contributions (NICs) is frozen at £12,570. The secondary threshold is frozen at £9,100.

                      The upper earnings limit remains frozen at £50,270

                        Keep on top of the latest payroll and HR changes at the PayHR site

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                          Student Loans:

                          Some of the thresholds for student loan repayments increase:

                          • Plan 1: £22,015 (increased from £20,195)
                          • Plan 2: £27,295 (frozen)
                          • Postgraduate: £21,000 (frozen)
                          • Plan 4 (Scotland): £27,660 (increased from £25,375)

                          Pensions:

                          Employers must contribute a minimum of 3% banded earnings towards an employee's workplace pension scheme, while employees must contribute the remainder to meet an 8% total contribution (this is a minimum, scheme rules may require a higher value). If an employer pays the minimum 3%, this will be 5%, but the amount could be lower if an employer pays a higher percentage.

                          Employers must also be aware of their automatic enrolment duties, which require them to automatically enrol eligible employees into a workplace pension scheme and contribute towards it. It's important to ensure that these duties are met to avoid any penalties from The Pensions Regulator.

                            Changes to Form P11D:

                            Form P11D is used to report expenses and benefits that employees have received during the tax year. From April 6th, 2023 P11Ds must be filed electronically.

                            It's essential to ensure that all expenses and benefits are accurately reported on Form P11D to avoid any potential penalties from HMRC.

                              How can I calculate Statutory Maternity, Paternity, Adoption, Shared Parental and Parental Bereavement Pay?

                              The following rates apply from 2 April 2023: Type of payment or recovery 2023 to 2024 rate Statutory Maternity Pay — weekly rate for first 6 weeks

                              The following rates apply from 2 April 2023:

                              Type of payment or recovery

                              2023 to 2024 rate

                              Statutory Maternity Pay — weekly rate for first 6 weeks

                              90% of the employee’s average weekly earnings

                              Statutory Maternity Pay — weekly rate for remaining weeks

                              £172.48 or 90% of the employee’s average weekly earnings, whichever is lower

                              Statutory Paternity Pay (SPP) — weekly rate

                              £172.48 or 90% of the employee’s average weekly earnings, whichever is lower

                              Statutory Adoption Pay (SAP) — weekly rate for first 6 weeks

                              90% of the employee’s average weekly earnings

                              Statutory Adoption Pay — weekly rate for remaining weeks

                              £172.48 or 90% of the employee’s average weekly earnings, whichever is lower

                              Statutory Shared Parental Pay (ShPP) — weekly rate

                              £172.48 or 90% of the employee’s average weekly earnings, whichever is lower

                              Statutory Parental Bereavement Pay (SPBP) — weekly rate

                              £172.48 or 90% of the employee’s average weekly earnings, whichever is lower

                              SMP, SPP, ShPP, SAP or SPBP — proportion of your payments you can recover from HMRC

                              92% if your total Class 1 National Insurance (both employee and employer contributions) is above £45,000 for the previous tax year

                              103% if your total Class 1 National Insurance for the previous tax year is £45,000 or lower

                                Scottish Earnings Arrestment

                                The Scottish Parliament have implemented an uprate the earnings arrestment tables from 6th April 2023.

                                These tables were last uprated in April 2022 and are normally uprated every three years.

                                However, given the current rate of inflation and current cost crisis, the Scottish Government were keen to conduct a further uprating to provide some additional financial resilience to those subject to an earnings arrestment.

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                                    Tables from 6 April 2023

                                      Conclusion:

                                      As the tax year 2023-2024 approaches, UK-based payroll professionals must be aware of the changes and new legislation that will impact their payroll processing. From changes to National Minimum Wage to updates in Income Tax and National Insurance Contributions, there's a lot to keep track of. By understanding these changes and their impact on payroll processing, payroll managers can ensure compliance with the latest laws and avoid potential fines and penalties from HMRC.

                                      By staying up-to-date and proactive in their payroll processing, UK-based payroll professionals can ensure the smooth and efficient operation of their payroll department. It's essential to keep track of key dates and deadlines, stay informed of changes to legislation and regulations, and ensure accurate reporting of expenses and benefits.

                                      Payroll is a critical function of any business, and it's important to get it right. By staying on top of these changes and working closely with HMRC, payroll managers can ensure that their business remains compliant and successful in the years to come.

                                        What are the 10 key things to remember about the new tax year?

                                        1. The new tax year in the UK starts on April 6th, 2023.
                                        2. Employers must be aware of important dates, such as the May 31st deadline for submitting the employer annual return and the July 6th deadline for submitting forms P11D, P11D(b), and P9D.
                                        3. The National Minimum Wage will increase for pay periods which commence from April 1st, 2023, with rates varying by age band.
                                        4. The Personal Allowance for income tax is frozen as £12,570 for the tax year 2023-2024.
                                        5. The primary and secondary thresholds for Class 1 National Insurance contributions remain frozen, as will the upper earnings limit for Class 1 NICs.
                                        6. The threshold for student loan repayments increased for both Plan 1 and Plan 4 loans.
                                        7. Employers must contribute a minimum of 3% banded earnings towards an employee's workplace pension scheme, while employees must contribute the remainder to meet an 8% total contribution (this is a minimum, scheme rules may require a higher value). If an employer pays the minimum 3%, this will be 5%, but the amount could be lower if an employer pays a higher percentage.
                                        8. Employers must be aware of their automatic enrolment duties including tri-ennial re-enrolment duties..
                                        9. Form P11D must now be submitted eletronically.
                                        10. By staying up-to-date and proactive in their payroll processing, payroll managers can ensure the smooth and efficient operation of their payroll department and avoid penalties from HMRC.

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