6 Key Changes for the New Tax Year 23/24

Last updated on 15 February 2023

It’s that time of year again.

As one tax year comes to a close, another one begins. More often than not, that usually means new tax rules and regulations coming into effect.

Whether you’re the type of person that absolutely #geeksout on this kind of stuff or the words ‘tax changes’ make you want to run a mile, know that you can count on us and our in-house CIPP payroll experts to break things down. We aim to be your go-to source for new tax year information, especially when it comes to payroll.

Top tip

This time of year tends to get busy, so the earlier you can get up to speed on these changes, the smoother things will go.

Here are six new changes we know of so far to look out for in the new tax year. For more information, check out our general guide on how to prepare for the new tax year.

National Living Wage and National Minimum Wage rates confirmed

First up on the agenda is the National Minimum Wage. 

Inflation and the Cost of Living Crisis has made pay a key issue to tackle across the UK this year.

In a similar move to last year, the government has accepted the full recommendations set forth by the Low Pay Commission. That means workers on minimum wage will experience another increase. 

As with many of the changes on this list, this is set to come into effect from April 2023. 

See the table below for the new rate and how it compares to the previous year.

Rate from April 2023Current rate (April 2022 to March 2023)Increase
National Living Wage£10.42£9.509.7%
21-22 Year Old Rate£10.18£9.1810.9%
18-20 Year Old Rate£7.49£6.839.7%
16-17 Year Old Rate£5.28£4.819.7%
Apprentice Rate£5.28£4.819.7%
Accommodation Offset£9.10£8.704.6%
National Living Wage and National Minimum Wage rates confirmed

Health & Social Care Levy removed and national insurance rates return to normal

Due to the mid-year change to national insurance rates, 2022/2023 ended with a few ‘hybrid’ rates. This was to account for any cumulative national insurance calculations. 

Those affected by these rates are directors, Class 1A on benefits as well as Class 1B on benefits. Expenses reported on P11D(b)s and through a PSA are also impacted. For example, directors who’s national insurance is calculated on a cumulative basis, saw a rate of 14.53% applied to any earnings over the primary threshold. 

Now that the health and social care levy has been removed and national insurance rates have returned to normal, the cumulative NI rates have also returned to normal. Director’s NI rates now match the employee NI rates, while Class 1A and Class 1B NI rates have returned to 13.8%.

Flexible work - new HR policy 

When it comes to HR policies there’s one major change we can expect and that’s rights to flexible work. At some point in 2023, flexible work will become a day one right, meaning employees will be able to request this on their employer from the moment their working contract begins.

Flexible work - National Insurance threshold
Flexible work - National Insurance rates

Statutory leaves rates also confirmed

As with minimum wage, another increase in statutory pay has also been announced.

From April 2023, there will be new rates for both statutory maternity pay and sick pay, as well as other benefits for employees who qualify.

The first six weeks of Statutory Maternity Pay (SMP) and Statutory Adoption Pay (SAP) will remain the same at 90% of average weekly earnings (AWE). After this, employees can expect a statutory weekly rate of 90% of AWE or £172.48, whichever is lower.

It’s worth noting that this new rate should be applied from the first Sunday of April (the 2nd of April 2023) and paid for the full statutory week that the Sunday falls before. 

The same change applies to Statutory Paternity Pay (SPP), Statutory Shared Parental Pay (ShPP) and Statutory Parental Bereavement Pay (SPBP) - the statutory weekly rate for these will be the lower of 90% of AWE or £172.48.

There is also a new weekly rate for Statutory Sick Pay (SSP) of £109.40, which comes into effect after April 6th.

A quick reminder…

HMRC has been issuing reminders to employers to register to payroll benefits. There are several advantages to registering for this scheme, including the fact that it helps cut down on lots of manual work at the end of the tax year. 

As PayFit includes both payroll and P11D features, payrolling benefits works seamlessly between the payroll and P11D functions. There’s no need to re-enter any benefit information elsewhere for it to be reported to HMRC.  

Any benefits that are payrolled are automatically included on the P11D(b) report created once your benefit information for the tax year is finalised,. Thes are then included on the automatic submission to HMRC. 

Top tip

Class 1A NIC is calculated on a monthly basis in PayFit which can make it easier to budget. Other payroll softwares usually provide one final Class 1A value at the end of the year. 

Company car tax rates increasing 

As per 2022’s Autumn statement company car tax rates are set to increase in two years’ time. 

So while that means no changes for this year, businesses should expect these rates to go up by 1% for all bands in the 2025/2026 tax year, and then another 1% in 2026/2027 and 2027/2028.

Here are the government’s current tables for CO2 emissions rates.

Changes to income tax rates

After a year of bold new plans, then backtracking, followed by complete U-turns, this is where we’ve landed in terms of income tax.

For the 2023 tax year, the basic rate of income tax will remain at 20%. Given the economic conditions, the basic tax rate will remain here for the foreseeable future. 

Income tax thresholds for Wales and the rest of the UK (rUK) have lowered the Additional Rate threshold, which is when employees start to pay tax at a rate of 45%. Scotland has also reduced the Higher and Top bands and rate thresholds, while also increasing the rates of tax at these thresholds.

Changes to income tax rates - Band

And in other news…

The Spring budget is scheduled to take place on the 15th of March 2023. That being said,  most payroll legislation for the tax year starting April 2023 has already been confirmed. 

Are you ready for the new tax year? 

At PayFit, we’ve baked payroll compliance into every single part of our solution. 

Our clients rest easy, knowing their monthly payroll will be fully compliant, even if they’re not up to speed with all the latest changes from HMRC.

You can run your payroll seamlessly, from automating payroll and HMRC submissions to producing HR and finance reports explicitly tailored to your organisation. No painstaking manual processes needed.

And to make it a little easier we have our checklist that provides you with all the important deadlines you need to know for the end and start of the tax year.

We also hosted a webinar about all the upcoming payroll legislation changes and what they mean for your organisation. You can watch it on-demand here.

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