The Chancellor announced some important changes in the Spring Budget 2023, including some key announcements impacting payroll.
We’ve taken the opportunity to summarise some of the key measures set to be introduced from the view of business owners and finance directors with responsibility for payroll.
Tax rates and thresholds
It was announced that the following will remain frozen:
- Standard Personal Allowance (£12,570)
- Income Tax rates (20%, 40% and 45%)
- Income tax threshold (basic and higher rate threshold)
However, from 6 April 2023, the additional rate income tax threshold will reduce from £150,000 to £125,140.
There were also some important updates in respect of National Insurance Contributions (NIC), including:
- NIC thresholds will remain frozen
- Rates of NIC for directors who are subject to an annual earnings period will revert to being the same as for other employed earners
- Rates of Class 1A NIC on benefits-in-kind and Class 1B NIC payable on PAYE Settlement Agreements will revert to 13.8 percent.
Helping people back to work
Where both parents are employed, and each earns less than £100,000, the introduction of free childcare hours for all children from the age of nine months could help many parents return back to work. This will be introduced in stages from April 2024.
Further measures, including more wraparound care for school age children to also facilitate the return of parents to the workplace.
Helping people to stay in work
In a drive to encourage over 50s back into the workforce, the Chancellor announced:
- The annual allowance (annual limit on UK tax relieved pension savings) will increase from £40,000 to £60,000,
- Higher earners with ‘adjusted income’ of over £260,000 will still be subject to tapering of their annual allowance, but the maximum taper will result in a £10,000 annual allowance, relative to £4,000 at present.
- Removal of the lifetime allowance.
Increasing employee engagement
The Chancellor confirmed:
- Enhancements to tax-advantaged Company Share Option Plan (CSOPs), which is a tax-advantaged employee share scheme, which will see the employee share options limit doubled from £30,000 to £60,000,
- The ‘worth having’ condition, which limits which types of shares are eligible for inclusion within a CSOP scheme, will be removed,
Charities and gift aid
Charitable tax reliefs are to be restricted to UK charities only, with donations to charities located in the EU and EEA no longer qualifying for UK charitable tax reliefs from April 2024. This will impact individuals who claim higher rate relief on donations to such non-UK charities.
Upcoming important government consultations
In summer 2023, the Government will consult on informal and ad hoc flexible working arrangements between employees and employers to better understand how these operate.
Additionally, the Government will consult on how the tax system might incentivise increased employer provision of occupational health support. This might potentially include expanding benefit-in-kind exemptions for employees and an enhanced deduction for the associated costs.
See how new legislation may impact your responsibilities over the next 12 months by downloading our Payroll Changes summary.
Need help navigating these key payroll announcements?
The announcements from the spring budget will affect businesses differently. Navigating any legislative changes and ensuring your organisation understands and implements the proposed changes can be challenging, especially given the financial and/or legal penalties associated with non-compliance – not to mention the negative impact it can have on the wellbeing of your staff.
To help understand how the announcements in the Spring Budget affect your organisation, you can contact our business growth experts
For more information about unburdening your business from payroll and pension compliance visit our SMART Employment page and read more about supporting your employees’ financial wellbeing, emotional wellbeing and physical wellbeing.
Amrik Birdi, Pension Consultant at Growth Partners
Amrik has a wealth of knowledge in pensions having joined Growth Partners from KPMG where he was responsible for advising companies and trustees on independent DC provider procurement exercises, DC investment strategy review, DC pensions strategy review, automatic enrolment compliance, and meeting ongoing governance requirements. Amrik spent three years before this as a Pensions Guidance Specialist at Pensions Wise helping members understand their pension and retirement options, empowering them to take control of their retirement journey. With a Diploma in Regulated Financial Planning and Certificate in DC Governance, combined with a Degree in Economics, Amrik is a fully qualified pensions consultant and able to offer strategic support to our clients on their options for workplace pension schemes and auto-enrolment.