As we approach the end of the UK financial year, businesses must begin planning for the critical end of year tasks. Payroll and finance teams will need to ensure they are prepared for a seamless transition into the new financial period.
In our UK year-end guide, we explore the key aspects that businesses need to be aware of, delving into the changes to tax codes, payroll processing considerations and compliance updates.
Changes in Tax Codes, Thresholds, Rates from 6 April 2024
The beginning of a new financial year usually means changes in tax regulations. Businesses must review recent tax updates and changes to guidance, paying special attention to changes in deductions, credits, and thresholds, to ensure compliance.
Income tax
It has been established that income tax allowances, rates, and thresholds for England and Northern Ireland would remain frozen as of April 6, 2024.
The Personal Allowance for anyone earning over £100,000 will be lowered by £1 for every £2 over £100,000 earned.
The personal tax-free allowance will remain frozen until April 2028, as stated in the Autumn statement of 2023. The status has been verified as frozen for April 2024.
There won’t be any expected general tax code increases as long as the personal tax exemption amounts remain frozen, as directed by form P9X authority.
Tax Rates and Bands
Rest of the United Kingdom (rUK: England and Northern Ireland with no prefix)
Scotland (prefix S)
During its budget meeting on December 19, 2023, the Scottish Parliament announced amendments to the Scottish Tax that would take effect on April 6, 2024.
Wales (prefix C)
On December 19, 2023, the Welsh Assembly announced that the tax threshold and rates would stay stable and that Wales’ tax rate for the 2024–2025 tax year would remain aligned with the rest of the United Kingdom Tax (rUK). The following will take effect on April 6, 2024:
National Insurance
It was announced that a further cut to national insurance by a further 2% taking the employee NI contributions from 10% to 8%, this is to take effect from 6th April 2024.
The below table shows the savings with the new NI reduction:
Employers with business locations in Investment Zone Tax Sites will be able to utilise the new NIC categories as of April 6, 2024, under the New Investment Zone Employer National Insurance Contributions (NICs) Relief (IZENR).
The employee’s job must have started on April 6, 2022, and it will end after 36 months.
Class 1 Earnings Band
The thresholds and limits remain frozen for April 2024 with the secondary threshold being frozen until April 2028:
* Please be aware that the PT/ST/FUST/AUST/UST/VUST/UEL for 2/4 weekly is not always a multiple of the weekly value because rounding requirements for tax law and NI law differ. Nevertheless, the LEL, PT, ST, and FUST are coincidentally multiples of the weekly values for this tax year. Throughout the course of four weekly pay periods, the UST, AUST, VUST, and UEL remain non-multiples.
Class 1 Contribution Rates
Beginning on April 6, 2024, the following will be applicable to both directors and workers (each using an alternate annual method):
Class 1A and Class 1B Contribution Rates
Class 1A (Termination and Sporting Testimonials), Class 1A (Benefit in Kind (BIK)) and Cass 1B (PAYE Settlement Arrangements (PSA)) will all remain frozen at 13.8%.
Also, the self-employed will no longer pay a separate category of National Insurance called Class 2 contributions.
Statutory Payments
Family Related Leave
A 6.7% increase has been confirmed for the statutory payment threshold and rates for weeks of statutory payment that are due on or after Sunday, April 7, 2023.
Paternity
Previously, fathers who were expecting or adopting were required to take their 2 weeks of paternity leave in one single block. Starting from 6th April, this can be taken either as a single block or in 2 single weeks. Employees are required to give at least 28 days’ notice before starting a block of leave.
Sickness
Changes to Statutory sick pay from 6 April:
Carer’s leave
From April 6th 2024, employees have a statutory right from day 1 of their employment to take one week of unpaid carers leave.
This can be taken from a half day up to a full week and the notice given to employers needs to be the same as the length of leave. I.e. If the employee needs 2 days carers leave, they need to give 2 days’ notice, although employers are allowed to waive this requirement.
This entitlement of leave will work on a rolling 12 month basis and the maximum entitlement is 1 week per 12 months.
Holiday pay and entitlement for zero-hour employees
In previous years, rolling up holiday pay was unlawful. But as of the new leave year, which starts on the 1st of April 2024, employers can ‘top up’ employee earnings in any specific pay period at a rate of 12.07%. In other words, rolled-up holiday pay is now lawful for zero-hour or part-year workers.
Pension Auto-enrolment
The pension earnings levels and triggers for 2024–2025 in connection to “Pay Reference Periods” (PRP) that begin on or after April 6, 2024, have not yet been certified by the Minister for Pensions. They are expected to remain frozen at the following levels through April 2022:
National Minimum wage and National Living Wage
The UK government confirmed the approval of the Low Pay Commission’s recommendation to raise the minimum pay rates in the country when they announced changes in the Autumn Statement 2023. The new minimum rates will take effect for pay periods starting on or after April 1, 2024. The Government have removed the 21-22 threshold and therefore all employees over 21 years old must receive the National Living Wage.
Student loans
The thresholds at which employees start to pay student loans for Plan 1 and 4 have increased. Plan 2 remains unchanged and changes to post-graduate loans are to be announced.
The table below shows the new thresholds:
Payroll Processing Considerations
For businesses, payroll processing is a critical component of year-end activities. Ensure that all employee records are up-to-date and assess any changes in payroll tax rates. Be mindful of compliance with labour laws and consider conducting thorough audits to identify and rectify any discrepancies. Additionally, communicate clearly with employees regarding year-end bonuses, benefits, and any changes to payroll procedures. This transparency promotes trust and reduces the likelihood of misunderstandings.
Here are some deadlines to be aware of:
- April 1st: Increase in the Minimum Wage and National Living Wage
The National Living Wage, which currently pays £10.42 per hour, will rise to £11.44 per hour by 9.8%. The hourly wage for those between the ages of 18 and 20 will increase from £7.49 to £8.60.
- April 5th: The tax year ends
This date signals the end of the 2023–2024 tax year. It is advisable for you to assess your tax and financial situation before this deadline, taking into account both personal and business planning considerations. By doing this, you can determine whether you are eligible for any tax benefits, allowances, or reliefs. April 5th is the deadline for:
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- Pension contributions, which qualify for tax relief in the 2023/24 tax year.
- Capital Gains Tax exemption, the final day to use the CGT, tax-free annual allowance for 2023/2024.
- Inheritance Tax, last chance to benefit from any further 2022–2023 exemptions as well as IHT tax-free gifting for the tax year 2023–2024.
- Benefit-in-kind, the last day to register for benefit-in-kind payroll benefits beginning in 2024–2025.
- April 6th: Changes in taxes that take effect:
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- The £6,000 capital gains tax allowance will drop to £3,000.
- The £1,000 dividend tax-free threshold will be cut in half to £500.
- The cap on the amount you can save in a pension before paying taxes will be lifted with the elimination of the Pension Lifetime Allowance.
- A new rule pertaining to lump amounts and lump sum death benefits for pensions is implemented.
- Class 2 NICs for independent contractors are to be removed.
- The self-employed’s Class 4 NICs will drop from 9% to 8%.
- A set of simplification initiatives will be put in place for low-income estates and trusts.
- People will be able to deposit money into many ISA accounts of the same kind throughout a tax year thanks to ISA amendments.
HMRC also have a helpful page on running payroll in general from a tax task perspective; Running payroll: Overview – GOV.UK (www.gov.uk)
Compliance Updates
Regulatory compliance is constantly evolving, and year-end marks an opportune time to review and update your business practices. Check for any modifications in industry-specific regulations, licensing requirements, and environmental standards. Conduct a comprehensive compliance audit to identify areas that may need attention and establish a plan to address any shortcomings. Staying ahead of compliance issues is essential for avoiding legal complications and maintaining the integrity of your business operations.
There are 3 legal updates for HR being implemented from 6 April:
1. Flexible working: The Flexible Working Regulations 2014 will be amended by new law that goes into effect on April 6, 2024, guaranteeing that an employee’s right to file a flexible working application is applicable from the moment of employment (a day one right).
2. Protection for new and expectant parents: Workers who inform their employer of their pregnancy on or after April 6, 2024, will also be eligible for additional protection for the duration of their pregnancy and, provided they notify their employer by that date, for up to 18 months following the baby’s birth. Otherwise, the protected period will expire eighteen months following the anticipated week of labour. Workers on adoption leave will be compensated for a period of 18 months following the placement date. Insofar as it relates to the time after the birth or adoption, employees whose maternity leave or adoption leave concludes on or after April 6, 2024, will be eligible for the additional protection.
3. Carer’s leave: On their first day of employment, qualified employees will be entitled to take caregiver’s leave. Employees will have the flexibility to take up to one working week of leave per 12-month rolling period, as needed to fulfil their caregiving obligations. They won’t be required to show proof of how or for whom they will use their leave, which the government claims will make the process easier for employers and workers alike. Employees who are responsible for providing long-term care to a dependent who qualifies are eligible.
Also, it is important to note that:
- Begnining on April 6, 2024: HMRC will deduct the sum owed by the deemed employer from the taxes that an employee or their intermediary has already paid. For income tax and National Insurance contributions (NICs) assessed by HMRC on or after April 6, 2024, due to off-payroll working errors in payments made beginning on April 6, 2017, this modification is applicable.
For more information on compliance checks please visit HMRC compliance checks: help and support – GOV.UK (www.gov.uk)
The financial year-end is a critical period that demands careful attention to detail. By staying informed about updates to tax codes, addressing payroll considerations, and ensuring compliance with changes, you can pave the way for a seamless transition.
Navigating the complexities of year-end can be daunting, but you don’t have to go it alone – we’re here to support you along your payroll journey.
