The Chancellor of the Exchequer presented his Autumn Statement to Parliament on Wednesday 22 November 2023. Below, we explore the key changes announced in Budget 2023 and what they mean for the world of payroll. Understanding how these changes will influence your payroll operations is vital, to ensure your organisation is compliant and your employees are compensated accurately.
Summary of Key Payroll Changes
- Increase of NMW to £11.44 – rise of £1.02 per hour
- Class 2 NI being abolished for self employed
- Class 4 NI being reduced by 1% for self employed
- Reducing NI by 2% from Jan 24 from 12% to 10%
- Consultations into having pensions paid into individuals pots
- Looking to reform the ‘fit note’ so there’s treatment in place rather than time off work
- NI relief for employers of veterans
Increasing the living wage from £10.42 to £11.44 is an increase of 9.8% (£1.02) meaning that for the average 37.5 hour per week worker, their salary will go from £20,319 to £22,308, an increase of almost £2,000. Or broken down monthly, it has gone from £1693.25 to £1859 pre-tax.
On top of this the chancellor also announced a reduction in National Insurance payments, from 12% to 10% – this is to take effect from 6th January 2024.
For those who are self employed, the chancellor announced a completed abolishment of Class 2 NIC and a reduction in Class 4 NIC from 9% down to 8%.
It was announced that there is a consultation to take place which could allow employees to choose which pension pot their pay is paid into. This is to reduce employees having multiple pots from different jobs, however could be a difficult administrative job in payroll.
Employers of veterans will be given extra National Insurance relief. No further details released yet on how this would work.
Finally, the chancellor announced that in order to get more people back into work who may be off work sick, the fitnote process is to be reformed. The default for going forward will be that people seek treatment for their ill health rather than time off work.
Full details of the measures can be found on the official GOV.UK website here.
If you would like to talk to us in more detail about how we can support your payroll process, please feel free to get in touch.
The above is our interpretation of the upcoming changes announced on Wednesday, 22nd November 2023, it is not intended to constitute tax, financial, or legal advice. Some elements of these measures may be subject to change.