Four key changes you need to know about this new tax year

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PayFit

Last updated on 20.01.2022

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 four new changes we know of so far to look out for in the new tax year.

National Living Wage & National Minimum Wage

First up on the agenda is the National Minimum Wage. 

The Low Pay Commission has updated its recommendations for the upcoming tax year, and it looks like workers will benefit from another significant boost. A substantial increase of 59 pence or 6.6% will result in a new National Living Wage of £9.50/hr.

The decision was agreed to unanimously by the Commissioners. The government also fully supports it; they aim to get the minimum wage back on track to reach its 2024 target of two-thirds of median earnings. 

Of course, this comes against the backdrop of an economy still in recovery. The signs, however, are promising. Strong GDP forecasts, pre-pandemic employment levels and a record number of advertised vacancies all point to a post-covid resurgence that supports these new wage increases.

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

Rate from April 2022Current rate (April 2021 to March 2022)Increase
National Living Wage£9.50£8.916.6%
21-22 Year Old Rate£9.18£8.369.8%
18-20 Year Old Rate£6.83£6.564.1%
16-17 Year Old Rate£4.81£4.624.1%
Apprentice Rate£4.81£4.3011.9%
Accommodation Offset£8.70£8.364.1%

Statutory Maternity Pay

The minimum wage isn’t the only rate change you can expect at the end of this tax season. 

From 3rd April 2022, 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 £156.66, whichever is lower.

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 £156.66.

There is also a new weekly rate for Statutory Sick Pay (SSP) of £99.35, which comes into effect after April 6th.

National Insurance rates and thresholds

HMRC has confirmed new National Insurance (NI) rates for the 2022-2023 tax year.

You can find the new earning threshold and contribution rates in the tables on the CIPP website.

Health and social care levy

2022 will also see a new statutory deduction in the form of the health and social care levy. 

This deduction is part of a £12 bn investment on the part of the government to improve NHS and social care systems. 

Starting on the 6th of April, it will apply to Class 1 ER contributions for all employees. Employers who can claim veteran relief (for the first £50,270 of earnings) or who have employees in the M or H NIC category (again, for the first £50,270 of earnings) will be exempt.  

In other words, this levy will result in an additional 1.25% in payment for all employees currently attracting a NIC liability.

Despite not paying NICs, the levy will also apply to employees over state pension age from April 2023.

If you'd like to know more about the new health and social care levy check out this article.

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

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