Is your payroll ready for the new tax year?

The last 12-months have seen an increasing focus on wage increases and industrial action in the public sector. Reflecting this upward trend, April 2023 will see a significant percentage increase to the National Living Wage headline rate of 9.7% to £10.42 an hour.

Other increases to the statutory age band rates have been notified and employers should ensure that their workers are paid at, or above, the new rates as of 1^st April and reflect this in earnings paid for the week ending 7^th April. Software upgrades will change the core rate but the core rates need to be applied at each stage of the process, including time and attendance, overtime rates, etc. to ensure staff are paid accurately.

Employers with pension sacrifice arrangements should take particular care to ensure that all staff remain above the minimum earnings rates for all hours worked post-sacrifice. 

Following the dual challenges of the pandemic and Brexit, most employers will acknowledge an increase in flexible working, with many articles covering the pros and cons of these arrangements. For an employer (or employee) where this flexible arrangement crosses a land border, the need to understand the income tax, social security, and compliance impact increases significantly.

Any tax professional worth their salt will advise that putting the right structure and compliance measures in place at the start of such arrangements is much easier than trying to unpick and update the issues afterwards. Short Term Business Visitor Arrangements, A1 certificates, and shadow payroll are becoming part of normal operations for NI/UK and European employers.

One aspect of flexible working that doesn’t cross a border is Shared Parental Leave (SPL), which was introduced in 2015. The intention from Government was to give parents more choice regarding their childcare arrangements and enabling mothers to return to work sooner, while allowing their partners to be involved in their child’s early-years care. The provisions allows couples with new babies to share up to 50-weeks of leave and 37-weeks of statutory shared parental pay between them at the lower rate of Maternity Pay. Government launched an online tool to help working families make the most of the Shared Parental Leave and Pay Scheme.

Ahead of April 2023 employees should take a few minutes to check their tax code, make sure the correct National Insurance Number is being used, and to complete some basic housekeeping. Contacting HMRC by telephone is a little hit or miss. In contrast, the HMRC App is available and user- friendly once you satisfy the authentication process.

The App allows you to manage your communications, tax codes, and see real-time payments from your employer as they are reported through Real Time Information (RTI) submissions. The App can be particularly useful for those who have Benefits in Kind (BIK) reported on from P11D by the employer. As these submissions are annual and in arrears they can sometimes lag behind changes in benefit and circumstances. Using the App allows you to make the changes as they happen and when your P11D arrives you just need to make sure the form and App align.

Whether you are an employer, or an employee, there are some steps to complete to ensure you are ready and prepared for the new tax year.