Core Payroll

There are a number of changes for employers to take into account for the 2023/24 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
• P9 tax codes
• National Minimum Wage and National Living Wage
• Student loans
• Statutory payments
• Statutory recovery
• Childcare Vouchers
• Earnings Arrestments & Court Orders
• Dividend Allowance
• Salary Advance
• Employment Allowance
• Auto-enrolment & compliance

Salary – Sole Directors

The most tax efficient director’s salary for 2023/24 is £9,100 per annum. This level of pay is above the Lower Earnings Limit, 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.

For closing off 2022/23, you will need to consider the blended rate for NIC purposes. The rates are 12.73%, 2.73% and 14.53%. More information can be found here.

P9 tax codes

Notice of Coding email notifications will be sent from week commencing 6 February 2023 until 5 March 2023. The notice advises that your employees’ coding for the tax year starting 6 April 2023 can be viewed within your PAYE Online Account. 

National Minimum Wage (NMW) and National Living Wage (NLW)

From 1 April 2023 there will be an increase in the NMW and NLW. We have outlined the new 2023 hourly rates below.

Remember, all increases to minimum wage apply from the employee's next ‘pay reference period’ following the effective date of the increase. However, you may wish to increase from 1 April 2024.

Student loans

From 1 April 2023 there will be an adjustment to Plan 1 and Plan 4.

Plans 1, 2 and 4 remain at 9% for any earnings above the respective thresholds. Postgraduate loans (PGL) remain at 6% for any earnings above the respective threshold

Statutory payments

The statutory payments are increasing based on CPI which has been set at 10.1%.

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 £172.48.

Statutory Paternity Pay (SPP), Statutory Shared Parental Pay (ShPP) and Statutory Parental Bereavement Pay (SPBP) will all share the same weekly rate of £172.48 or 90% of AWE, whichever is lower.

The weekly rate for Statutory Sick Pay (SSP) will be £109.40. This will apply from 6 April 2023.

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.

Childcare Vouchers

Due to recent working requirements, employees may not currently have needed the usual number of Childcare Vouchers. It is more than likely that further changes will be required in 2023/24 so it’s more important than ever to re-evaluate your Basic Earnings Assessments (BEA). The BEA is a very real annual and on-going 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.

Earnings Arrestments & Court Orders

Employers will be aware that there are three Scottish Arrestments (the equivalent of court orders):

The Earnings Arrestment – for civil debts and fines including Council Tax non-repayments. The deduction made from pay is calculated according to a set of tables that recover a percentage of the debt according to the level of earnings in the pay period

The Current Maintenance Arrestment - to enforce any ongoing maintenance obligation. The deduction is a daily rate, specified by the Sherriff, and multiplied by the number of calendar days in the pay period

The Conjoined Arrestment Order - where individual enforcement are withdrawn and reissued as an Order that amalgamates the debts

In December 2022, the Minister for Public Finance decided to adjust the rates from April 2023.

Monthly

Weekly

Daily

The above Scottish Arrestments may apply to employees in any part of the UK if they have enforcements made in Scotland.  Therefore, all employers need to be aware of these changes from 6 April 2023. 

Dividend Allowance

From 6 April 2023, the tax-free allowance for those who receive dividend incomes will be reduced from £2,000 to £1,000.

Salary advance

Under the current legislation, such advance payments are treated as a payment on account of earnings. As a result, employers must submit an additional Full Payment Submission (FPS) to record these advance payments.

HMRC recognises that the statutory position, if applied to salary advances, creates an extra administrative burden on both employers and HMRC. To address these issues, HMRC will amend secondary legislation so that salary advances can be reported on or before the employee’s contractual payday. This means each payment only needs to be included on an FPS once.

Employment Allowance

The EA remains unchanged at £5,000 for those who satisfy the eligibility criteria. 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 HMRC working hard over the year to streamline NI, we are now faced with a catalogue of NI categories for the 2023/24 tax year.

• A - Default - All employees apart from those who fall into any other category below
• B - Married women and widows entitled to pay reduced National Insurance
• C - Employees over the State Pension age
• H - Apprentices under 25
• J - Employees who can defer National Insurance because they’re already paying it in another job
• M - Employees under 21
• V - Employees who are working in their first job since leaving the armed forces (veterans)
• Z - Employees under 21 who can defer National Insurance because they’re already paying it in another job
• F - Employees who work in freeports, apart from those in groups I, L, and S as noted here
• I - Married women and widows who work in freeports and are entitled to pay reduced National Insurance
• L - Employees who work in freeports and can defer National Insurance because they’re already paying it in another job
• S - Employees who work in freeports and are over the State Pension age

Auto-enrolment & compliance

Auto-enrolment is 11 years old in October 2023 – who would have thought it?

The thresholds have been frozen at the previous rates:

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