There are a number of changes for employers to take into account for the 2022/23 tax year, including increases to National Minimum Wage and statutory payments.

We've broken down what you need to know into the following categories:

Salary – Sole Directors

The most tax efficient director’s salary for 2022/23 is £9,100 per annum. This level of pay is above the Lower Earnings Limited, so the taxpayer qualifies for the state pension, but below the National Insurance Primary and Secondary thresholds, so no employee or employer National Insurance contributions are due.

National Minimum Wage (NMW) and National Living Wage

From 1 April 2022 there will be an increase in the NMW. We have outlined the new 2022 hourly rates below.

 1 April 20211 April 2022Increase
Apprentice Rate£4.30£4.8111.9%
Workers aged 16 & 17£4.62£4.814.1%
Workers aged 18-20£6.56£6.834.1%
Adult workers aged 21 & 22£8.36£9.159.8%
National Living Wage (age 23 and over£8.91£9.506.6%

Remember, all increases to minimum wage apply from the employees' next ‘pay reference period’ following the effective date of the increase.

Student loans

From 1 April 2022 there will be an adjustment to Plan 1 and Plan 4.

Type%From April 2021 From April 2022 
  AnnualMonthlyWeeklyAnnualMonthlyWeekly
Plan 19£19,895£1,657£382£20,195£1,682£388
Plan 29£27,295£2,274£524£27.295£2,274£524
Plan 49£25,000£2,083£480£25,375£2,114£487
PGL6£21,000£1,750£403£21,000£1,750£403

HM Revenue & Customs confirmed on Friday 28 January 2022 that Plan 2 and PGL would remain at their 2021/22 threshold and repayment rate.

Statutory payments

The statutory payments are increasing based on CPI which has been set at 3.1%.

The first six weeks of Statutory Maternity Pay (SMP) and Statutory Adoption Pay (SAP) remain the same, at 90% of the employee’s average weekly earnings (AWE). The statutory weekly rate for all weeks after this will be the lower of 90% of AWE or £156.66.

Statutory Paternity Pay (SPP), Statutory Shared Parental Pay (ShPP) and Statutory Parental Bereavement Pay (SPBP) will all share the same weekly rate of £156.66 or 90% of AWE, whichever is lower.

These changes will apply from 3 April 2022.

The weekly rate for Statutory Sick Pay (SSP) will be £99.35. This will apply from 6 April 2022.

Statutory Payment TypeEarnings ThresholdStandard Rate
 2021/222022/232021/212022/23
Statutory Adoption Pay£120£123£151.97£156.66
Statutory Maternity Pay£120£123£151.97£156.66
Statutory Paternity Pay£120£123£151.91£156.66
Statutory Shared Parental Pay£120£123£151.91£156.66
Statutory Sick Pay£120£123£96.35£99.35

Statutory recovery

For family related payments, employers can recover either 92% or 103% of the statutory element paid to staff and declared on your Full Payment Submission.

Percentage of payment recoverable92%
Percentage of payment recoverable (Small Employer's Relief)100%
NI compensation recoverable under Small Employer's Relief3%
Annual NICs threshold for Small Employer's Relief£45,000

Childcare Vouchers

Due to current working requirements, employees may not have needed the usual number of Childcare Vouchers. It is very likely that further changes will be required in 2022/23 so it’s more important than ever to re-evaluate your Basic Earnings Assessments (BEA). The BEA is a very real annual and ongoing exercise to determine predicted marginal rates

As a rule of thumb, the BEA is UK-wide and doesn’t consider devolved nations so the default UK bands should be applied.

Rate of Income TaxWeekly exempt limitMonthly exempt limit
Basic£55£243
Higher£28£124
Additional £25£110

Earnings Arrestments & Court Orders

The Scottish Parliament confirmed that the net earnings threshold would be set at £566.61 per month for 2022/23.

The Welsh Parliament confirmed that the net earnings threshold would be set at £430 per month for 2022/23.

As normal, these thresholds are subject to change.

Employment Allowance

The Employment Allowance is currently £4,000 for those who satisfy the eligibility criteria (rising to £5,000 effective from 6 April 2022. ).

As a reminder, you can only claim against your employers’ Class 1 National Insurance liability up to a maximum of £5,000 each tax year.

Key points to consider:

  • Do you have more than one payroll?
  • Are you part of a group?
  • Do you receive de minimis state aid?
  • Are you employing a personal, household or domestic worker?

More information can be found here.

National Insurance (table letter)

Despite HM Revenue & Customs working hard over the year to streamline NI, we are now faced with further complexities for the 2022/23 tax year.

  • F - The Freeport Standard rate
  • I - Freeport married woman’s reduced rate election
  • S - Freeport over state pension age
  • L - Freeport Deferment
  • V - Veterans Standard

Auto-enrolment & compliance

Auto enrolment is 10 years old in October 2022 – who would have thought it?

The thresholds have been frozen at the 2021/22 rates:

Threshold2022/23
Earnings Trigger£10,000 - frozen
QEB Lower Limit£6,240 (LEL) - frozen
QEB Upper Limit£50,270 (UEL) - frozen

The Pensions Regulator takes non-compliance with automatic enrolment very seriously, and will enforce against employers who fail to give their staff the pension they are due.

Areas to focus on:

  • Opt-outs not being processed correctly
  • Statutory communications not being provided to employees within specified deadlines
  • New employees not being assessed
  • No action being taken for employees on their 22nd birthday
  • No action being taken for employees whose income increases to about £833 per month or £192 per week
  • Payments not being deducted by payroll
  • Incorrect tax relief method being used
  • Payments not being paid over to pension providers on time.

 

Please don't hesitate to get in touch If you would like to discuss any of this with a member of our Payroll team