Jeremy Hunt has announced his Spring Budget for 2023/2024. It focuses on boosting the UK economy through employment with policies such as increased free childcare, pension boosts and tax cuts for businesses. As ever, there are a number of changes which both directly and indirectly affect payroll.
We’ve summarised the most important ones to help you stay ahead.
Income tax rates and thresholds
Every Spring Budget introduces a series of changes to the UK tax rates and thresholds. Although the 2023 Spring Budget hasn’t seen considerable reforms in rates and thresholds, there are a few important changes to be aware of. We’ve created a helpful breakdown of the current rates and thresholds for the 2023/2024 tax year.
What this means for payroll: Payroll professionals must adjust their payroll software to reflect the changes to ensure that employees are paid accurately with the correct amount of tax.
Pension changes
The Lifetime Allowance (LTA), above which withdrawals were taxed at 25% (or 55% if withdrawn as a lump sum), has been scrapped. The Annual Allowance (AA), which is the most you can invest into a pension per year with tax relief, has been increased from £40,000 to £60,000. The Money Purchase Annual Allowance (MPAA), which reduces your Annual Allowance when you start to receive money from a pension, has been increased from £4,000 to £10,000.
What this means for payroll: Payroll professionals must adjust their payroll software to reflect the changes in pension rates. There may also be a noticeable increase in older employees extending their careers as they can continue to benefit from pension savings.
Tax simplification
Payroll providers will soon be allowed to register payroll benefits, also known as benefits in kind, on behalf of their clients. This is made possible by the government introducing HMRC-approved IT systems and software that ensure the safety of employees’ data.
What this means for payroll: This is seen as the government removing red tape in a bid to simplify payroll. It will empower payroll service providers like Finesse Resources to deliver even more value to customers. The government didn’t provide much detail on how this process will work and when the changes will be introduced, but we will provide updates on our blog when details emerge.
Other changes that could indirectly affect payroll
Tax cuts for new businesses
A new 'full expensing' policy designed to encourage young companies to invest more in equipment, machinery and infrastructure. This may lead to smaller businesses being able to add more staff to their payroll.
Childcare Support
30 hours of free childcare for every child over the age of 9 months may encourage young parents to return to work after a period of maternity leave.
Apprenticeships for those over 50
Branded ‘Returnerships’, government-funded skills programmes will target out-of-work people over the age of 50 by helping them return to the workplace. It is hoped this will encourage older people to get back into work and reduce the number of vacant positions.
How to stay on top of payroll changes
With a government emphasis on generating employment and business growth, small to medium businesses can expect their finance and HR teams to be busier than ever. There’s never been a better time to work with a payroll provider like Finesse Resources for full or partial support of your business’s day-to-day payroll management. We stay on top of all legislation and technological changes to ensure your payroll functions smoothly. Put simply, we make sure your employees get paid accurately and on time, every time.