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April 22, 2024
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Payroll
Every fiscal year brings new challenges for accounting and payroll teams as they try to adapt to the changes revealed in the Spring budget. With changes to the national minimum wage, student loan thresholds, pensions and national insurance, it’s important for employers to understand and adjust to the new guidelines.
Every fiscal year brings new challenges for accounting and payroll teams as they try to adapt to the changes revealed in the Spring budget. This year, updates from HMRC have added more layers to the already complex regulatory landscape. With changes to the national minimum wage, student loan thresholds, pensions and national insurance, it’s important for employers to understand and adjust to the new guidelines. In this blog post, we will discuss these changes and their impact to assist you in keeping your UK payroll up to date.
Announced during the Spring budget, from 6th April 2024 further cuts to National Insurance Contributions (NIC) will become effective. Employees will see the main rate of their Class 1 National Insurance Contributions drop to 8%. This follows the reduction in January from 12% to 10%. The primary threshold for 2024-25 is set at the same level as for income tax -£12,570 per year. Additionally, those making Class 4 NationalInsurance contributions will see a further reduction from 8% to 6%.
Positive news as the cost of living rises, so has National Minimum Wage rates. This year’s increase will be one of the largest hikes in recent history. 2024’s National Living Wage rate(applicable to employees aged 21+) will be set as £11.44, a 9.8% increase from2023’s rate of £10.42. Along with increases come adjustments to thresholds, the below table outlines these.
NMW for 2024 should be applied to pay reference periods starting on or after 1st April.
Importantly, employers must keep abreast of increases;The application of the minimum wage to workers aged 21+ from April 2024 andapprentices 19 & over who have completed one year in the programme. Employers who do not pay staff at the appropriate rates risk being 'named and shamed' aspart of the government NMW investigations – get in touch if you need assistance with this as we recently assisted a client with an HMRC review that closed with a positive result.
Employers should also be aware of increases to Statutory payment rates for 2024/25 to ensure they are paying employees their legal entitlement. From the 6th April2024, the rate for Statutory Maternity Pay, Statutory Paternity Pay, Shared ParentalPay, Statutory Adoption Pay and Statutory Bereavement Pay is set at £184.03 per week.
The Statutory Sick Pay weekly rate for the 2024/25 year is £116.75 which applies to all employees. However, the actual amount paid is based on the number of ‘qualifying days’ they work each week.
Tax rates remain halted at the 2023/24 rate in England, however, there are changes to Scottish Tax bands and thresholds.
Personal allowance for 2024/25 remains frozen halted at the same value as the previous 3 years:
- £242 P/W
- £1,048 P/M
- £12,570 P/Y
With the standard tax code remaining as 1257L, if your tax code differs from this, contact the payroll team at Folio to help you work out why. In addition to the freeze on personal allowance, tax rates and thresholds in England, Wales and Northern Ireland are unchanged from2023/24.
Effective from 6th April 2024, Scotland have introduced a new ‘Advanced’ income tax band which applies a 45% tax rate on employees’ earnings between £75,000 to £125,140. The introduction of the advanced band brings the total brackets a taxpayer may fall into to six in comparison to the three in England, Wales and NI.
For 2024/25, Scottish employees will be taxed as follows:
Repayment thresholds for Plan 1 & 4 have increased, but no change for Plan 2 which remains at £27,295 (£2,274.58 monthly Gross pay).
The minimum pension contributions for the tax year will continueat the same level as 2023/24. Qualifying earnings thresholds will remain inline with National Insurance thresholds – Lower earnings limit £6,240 and UpperEarnings Limit £50,270 per annum.
Introduced in 2014, Employment allowance provides eligible employers relief on their Class 1 NICs liabilities. For employers whose Class 1 National Insurance liabilities in the previous tax year were less than £100,000, they may claim up to £5,000 for 2024/25.
At Folio our team of expert pay rollers work to ensure our clients are confident in their payroll operations. From accurate and timely payroll processing using cloud-based software Paycircle to advising on critical matters, we’re here to assist.
Have you got a compliance issue or any questions regarding your payroll? Get in touch using the contact button to discuss how partnering with Folio can benefit your operations.
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