Navigating the Autumn Statement 2023: Changes to Payroll in 2024 

With the new year around the corner, we wanted to identify and explain the recent changes to payroll we will see from as early as January 6, 2024, as highlighted by the Chancellor’s Autumn Statement Budget. If you have any questions or concerns, please don’t hesitate to contact one of our team today. Feel free to contact us here.  

Changes to National Insurance  

Payroll Employees: The National Insurance Contributions (Reduction in Rates) Bill means the implementation of the largest-ever cut to National Insurance. The chancellor announced that National Insurance will be cut from 12% to 10% for employees earning between £12,570 and £50,270. It is expected that this will positively impact around 27 million payroll employees living in the UK. The Government has estimated that an employee earning an average salary of 35,000 will save around £450 a year. 

The effective date for these changes is set for January 6, 2024. 

Self-Employed: Self-employed individuals earning over £12,570 a year will no longer be required to pay the £3.45 per week class 2 National Insurance contributions (NICs). They will continue to pay class 4 NICs, which are currently 9% on profits between £12,570 and £50,270 and 2% on profits exceeding that amount. The main rate for Class 4 NICs will be reduced to 8% in the next tax year. The chancellor stated that these changes will save a self-employed person with £28,200 in profits a total of £350. 

Although class 2 NICs provide access to benefits like the state pension, their removal will not affect eligibility. Self-employed workers earning less than £6,725 can voluntarily contribute to maintaining benefit entitlement. Those earning between £6,725 and £12,570 will receive a credit, consistent with the current system. 

The effective date for these changes is set for April 2024. 

Changes to the National Minimum Wage 

The chancellor has approved the Low Pay Commission’s proposal to raise the National Living Wage by 9.8%, bringing it to £11.44 per hour. Additionally, the eligibility for the National Living Wage will be expanded to include individuals aged 21 and over, a change from the current threshold of 23 and over. 

The new rates will be: 

• 21-year-old and over rate will be £11.44 per hour 
• 18- to 20-year-old rate will be £8.60 per hour 
• 16- to 17-year-old rate will be £6.40 per hour 
• The apprentice rate will also be £6.40 per hour 

The effective date for these changes is set for April 1, 2024. 

Changes to Pensions  

In line with the Government’s ‘triple lock policy,’ The chancellor has affirmed his dedication to this promise, ensuring that pensions will see an 8.5% increase to £221.20 per week. This aligns with the growth in wages, which demonstrated the most substantial increase among the three potential benchmarks. Comparatively, this results in a weekly gain of £3.70 if inflation had been the basis or a more significant increase of £12.50 when compared to the minimum 2.5% rise. 

The effective date for these changes is set for April 2024. 

What will my new Tax-Free Allowance be? 

The tax-free personal allowance, which typically sees a slight increase each year, will be frozen at the 2023/24 level of £12,570 for the tax year 2024/25 (from April 6, 2024, to April 5, 2025). For the tax year 2024/25, you will be liable to pay income tax on earnings exceeding the threshold of £12,570. For instance, if your income is £18,000 in a tax year and you subtract the Personal Allowance, the taxable portion of your income would be £5,430. 

It is important to be aware that the tax-free Personal Allowance starts to diminish as your income increases. For every £2 earned above £100,000, the Personal Allowance decreases by £1. This means that if you earn £125,140 or more, your personal tax allowance becomes zero. 

The effective date for these changes is set for April 6, 2024. 

What is the new PAYE Tax Rate? 

The government plans to enact a new law through the Autumn Finance Bill 2023. This legislation will empower HMRC to decrease the PAYE liability of a deemed employer in cases where a working engagement, initially classified as self-employed for tax purposes, was deemed incorrect. The adjustment will consider the tax and National Insurance contributions previously made by both the worker and their intermediary on earnings from off-payroll working engagements. Further details on this change’s implementation will be outlined in secondary legislation to be introduced later.  

The effective date for these changes is set for April 6, 2024. 

What are the changes to Holiday Pay Averages?  

The Harpur Trust v Brazel decision, implemented in 2020, has been overturned, allowing rolled up holiday pay for irregular hours workers and part-year workers. The calculation will be based on total earnings in the pay period, with an accrual method ensuring leave is based on actual hours worked. It is crucial to prepare for these changes, reviewing payroll systems for adjustments. These changes aim to provide fair compensation for non-standard work patterns, making it a great time to communicate and address concerns with your workforce. 

The effective date for these changes is not yet set. 

Please contact us if you need to discuss how these changes may affect your business or tax affairs in the coming months.