Payroll Legislation in the UK for 2023

The United Kingdom is a country that is changing rapidly in many different areas, especially from a business perspective. The ramifications of Brexit and COVID-19, along with high inflation rates and the cost-of-living crisis, mean big changes are on the horizon in terms of finance, employment law, and payroll.

Every business is expected to remain compliant with all relevant regulations so that employees get paid fairly and so the right contributions are made to the state coffers. But with so much going on, it can be difficult to keep track. In this blog, we’ll highlight some of the most recent changes you should be aware of, as well as some major developments on the horizon in the year ahead.

What changed in 2022?

The Spring Statement of 23 March 2022 had several implications from a payroll perspective. In particular, on 6 July the Primary Threshold and Lower Profits Limit for National Insurance were raised from £9880 to £12,570, to align them with the personal allowance threshold for Income Tax.

Other National Insurance thresholds are now as follows:

• Lower Earnings Limit: £6396

• Secondary Threshold: £9100

• Freeports Upper Secondary Threshold: £25,000

• Upper Earnings Limit and Upper Secondary Thresholds: £50,270
  
  

For Income Tax, the following bands apply for England, Wales and Northern Ireland for the 2022/23 tax year:

• Personal Allowance up to £12,570: 0%

• Basic Rate from £12,571 to £50,270: 20%

• Higher Rate from £50,271 to £150,000: 40%

• Additional Rate beyond £150,000: 45%
  
  

Different rates apply in Scotland, where there are five progressive bands of taxation rather than three:

• Personal Allowance up to £12,570: 0%

• Starter Rate from £12571 to £14,732: 19%

• Basic Rate from £14,733 to £25,688: 20%

• Intermediate Rate from £25,689 to £43,662: 21%

• Higher Rate from £43,663 to £150,000: 41%

• Top Rate beyond £150,000: 46%
  
  

The Statutory Sick Pay rate for 2022/23 is £99.35 per week. All other statutory pay entitlements - maternity, paternity, adoption, paternity adoption and shared parental - are at £156.66 per week or 90% of earnings, whichever is the lower.

What’s coming in 2023?

Looking ahead to 2023 and beyond, there are many different developments in the pipeline, all of which should be monitored closely by businesses that may be impacted.

• Post-Brexit implications: by the end of the year, the Government is aiming to abolish all laws that were derived by the EU that it doesn’t want to retain. This could lead to major regulatory changes across employment rights, working time, holiday pay, TUPEs, and more. While the Government may not achieve its stated timeframe, consultations and proposals for legislation mean that we will start to see what the long-term future of UK employment law is set to look like.

• Statutory payment increases: as is normal for a new tax year, wage and entitlements will rise from early April. The National Living Wage will come into effect, increasing the national minimum wage from £9.50 per hour to £10.42 for workers aged 23 and over; the lower rates for younger employees and apprentices will also rise. As this new rate means more employees will be on or around the minimum level, more companies will have to watch carefully to ensure they remain compliant.

  Statutory Sick Pay will increase from £99.35 per week to £109.40. Furthermore, the Government is also introducing a right for parents to take up to 12 weeks of paid leave if their baby is in neonatal care, on top of existing leave entitlements.

• Gender pay gap reporting: the future direction of Government policy on gender pay gap reporting is unclear. A review set for early 2022 failed to materialize, but later in the year, the short-lived Truss administration suggested that businesses employing fewer than 500 people wouldn’t be required to submit reporting. This is an area where policy may develop over the course of 2023.

• Ethnicity pay gap reporting: At a time when diversity and inclusion is playing a greater role in the world of work, an increasing number of businesses are choosing to create these pay gap reports. While ethnicity pay gap reporting is not going to be made compulsory, the Government does want to encourage voluntary reporting by providing guidance to those that do so. However, the Government has also said that those that do create reports should also publish an action plan alongside it. 
  
  

In summary

As this blog demonstrates, there is plenty going on right now, and most of these situations are evolving all the time. It may well be the case that, as well as what you’ve read above, there are developments in some of these areas in 2023 that we just can’t predict. If you’re concerned about staying on top of all your payroll and HR requirements, then working with an expert in global payroll can give you access to vital and current expertise.

To help you keep abreast of all the key payroll information, CloudPay has developed global payroll guides, full of the latest facts on more than 80 countries worldwide, including the UK. Explore the full set here and ensure you stay on top of your requirements.