8 new tax year changes you need to know about

The end of the tax year is a busy time for business, as accounts are finalised, reports are drawn up and a company’s financial health is assessed. As it’s been another challenging 12 months for most, it’s worth getting to grips with the changes that lie ahead in 2022/23, so that you can mitigate the effects by planning and adapting.

While the government has shown some leniency since 2020, keeping some rates level and granting grace periods in some areas to allow businesses to grapple with all the pandemic threw at them, it seems this year-end marks the end of the ‘soft landing’ era. Along with cost-of-living increases that have already hit hard in Q1 of 2022, employers need to be aware of several changes that will see the cost of employment rise in April.

Find out about these changes with this handy guide to the 8 key tax year changes for 2022/23.

1. National Insurance increase

From 6 April 2022 until 5 April 2023, National Insurance (NI) will rise by 1.25% for secondary class 1, 1A and 1B contributions. This means that for individuals earning £8,840 and more a year, employer contributions will rise from the current rate of 13.8% to 15.05%.

There are exceptions to this rise. Employees earning less than £50,270 per year who are also either apprentices under 25, employees under 21 or armed forces veterans are not included.

At the end of April 2023, a new Health and Social Care Levy will replace the 1.25% rise.

For more information on NI increases, thresholds and exceptions, visit The Times or the Institute for Fiscal Studies.

2. New National Minimum Wage and Living Wage

If any of your employees are on the National Minimum Wage (NMW) – i.e., those of school leaving age, including casual workers, those on zero hours contracts and agency workers – you need to account for the increase coming into effect on 1 April.

The NMW is set to rise by 82p to £9.18 per hour for 21- to 22-year-olds – an increase of 9.8%. For those aged 18–20, there will be an increase of 4.1%, seeing their wages rise from £6.36 to £6.83 per hour.

The National Living Wage (NLW), for those aged 23 and over, is set to increase by 6.6% to £9.50 (from £8.91).

To find out more, including the new rates for all age brackets and for apprentices, visit www.gov.uk.

3. Rise in Statutory Sick Pay

Another increase you need to be aware of is the rise in Statutory Sick Pay (SSP), due to apply from 6 April. This sees the weekly rate of SSP rise by £3.00 to £99.35 for up to 28 weeks.

For more information about SSP, the number of qualifying days, and to use the SSP rates calculator, visit www.gov.uk.

4. Increase in parental leave pay

From 3 April, employers will be paying their workers more for maternity, paternity, and adoption leave. While the basic rate for family-related leave remains the same at 90% of the employee’s average weekly earnings (AWE), the weekly rates have increased.

Statutory Maternity Pay (SMP) and Statutory Adoption Pay (SAP) stay at 90% of AWE for the first six weeks then increase to £156.66 (from £151.97) for the remaining weeks, or 90% of AWE, whichever is lower.

Statutory Paternity Pay (SPP) also increases to £156.66 per week or 90% of AWE, whichever is lower.

For more information on family-related statutory leave rates for 2022/23, including bereavement leave and the proportion of payments employers can recover from HMRC, visit www.gov.uk.

5. Statutory Redundancy Pay rise

Another change that will have an impact on your business’s bookkeeping is to Statutory Redundancy Pay (SRP). The maximum weekly pay is now capped at £571 per week, up from £544 in 2021/22.

The new overall maximum SRP, based on 20 years’ service, increases by £820 to £17,130.

These changes take effect as of 6 April. Find out more about redundancy, compensation and dismissal payment rates on the Chartered Institute of Payroll Professionals website.

6. Off-payroll working rules change

The off-payroll working rules, also known as IR35, were put in place to ensure contractors, consultants and freelancers who work like employees for companies pay roughly the same income tax and NI as actual employees.

The responsibility for this compliance used to fall to the individual, but, since 2021, it has been left to the company. The government had given companies wiggle room to adopt and adapt to the changes over the last year and weren’t imposing penalties for non-compliance. From 6 April, this grace period ends.

If you need to know more about IR35 compliance, you can access guidance and tools on the Government website.

7. Changes to right to work checks

If any of your workers are non-nationals, you should be aware that changes are coming into force from 6 April on how to evidence an employee’s right to work in the UK. From this date, all evidence will need to be checked and processed via the Home Office website. This means that physical biometric cards can no longer be used as evidence, even if the date on the card is still valid.

An up-to-date employer’s guide to right to work checks is available from the Government website.

Another change to note is that the temporary adjustments to right to work checks put in place during the first two years of the COVID-19 pandemic are ending on 3 September 2022. For more information on how this might affect you and your business, visit www.gov.uk.

8. An extra bank holiday

To celebrate the Queen’s Platinum Jubilee, there will be an extra bank holiday on Friday 3 June 2022. The regular May Day Bank Holiday has been moved to Thursday 2 June this year, giving most employees a four-day weekend.

Have you considered how this extra holiday might affect your business? Will you honour the extra day’s leave? Make sure you communicate with your staff so that it is clear to everyone – part-time, full-time, agency workers etc. – whether or not they are offered the additional bank holiday.

Do you need to start making any adjustments now to ensure business runs smoothly over that period?

All of these changes could impact how you run your business, whether that’s in budgeting for extra employment costs as a result of the rates rises across the board or taking the additional expense into account when forecasting recruitment costs.

Key Appointments are here to help with your recruitment needs. Call to chat with one of our friendly team members on 0844 504 4666 or drop us a line at info@key-appointments.co.uk, or fill out or contact form.