Ciphr Payroll tax year end 2023 legislative update

00:01
Hello, and welcome to today’s webinar hosted by Ciphr Payroll. It’s our tax year end 2023 legislative update. I’m Cathryn, Ciphr’s head of content. And with me today is Amanda who’s Ciphr’s payroll sales manager. Hi, Amanda, good to have you with us today.

00:16
Hello, good morning and welcome everyone to the session really looking forward to taking you through all the exciting changes that we’ve got in score for for payroll for the coming year.

00:29
Thanks, Amanda. I’m really short identity. And to keep it nice and simple. We’re going to give you a review of changes to payroll to payroll in 2022, of which there were quite a few, then we’re going to look ahead to legislative changes that are going to affect payroll on 2023 from that new tax year and new tax year next month. And then we’ve got time to answer your questions at the end. So if you have any questions, please send them in using the control panel that you see on your screen throughout the webinar. If you’re watching this live, this session is being recorded and the recording will be sent to you automatically. And there’s no further action you need to take to review that to receive that recording. And of course, you can review that at your leisure and share it with any of your colleagues. And before we dive into the main content today, and before I hand over to Amanda just a quick about Cypher for those of you who aren’t used of our products. So it is a specialist provider of HR Payroll recruitment and learning software through our HCM platform server connects. Our solutions are used by more than 600 organisations across the UK in a wide variety of sectors. If you want to find out more about any of our solutions, you can visit our website that’s oprah.com or email info@cypher.com. There’s also the option at the end of the broadcast to opt in for more information from us. Okay, with that, I’m going to hand over to Amanda now.

01:50
Fantastic. Thank you, Catherine. So we thought we’d start our session today just by taking a look back at the previous year because it was it was a really stormy year in, in payroll and you know, generally in the UK. So as you can see on this slide, of course, just as a reminder, we had three prime ministers, which I think is unprecedented, certainly in recent times the invasion of Ukraine, which has just gone through its first anniversary, the Queen’s Jubilee and that lovely sketch with Paddington Bear, and the bomb and eat sandwiches, of course, a mini budget more to come on that later. And we’ve got inflation all over the place. And if you’re a football supporter, of course, congratulations to the lionesses. So, if it was a really, really dinner, after sort of pandemic and everything, you just wouldn’t believe how crazy things continue to get. But here we are, in a fresh year. So when so what did happen in payroll in 2022. So there were a lot of changes and a lot of things that were off and on again, we never normally have changes to national insurance at all during a tax year. In payroll normally, that is the one constant that you can rely on. But look at all the changes that we had to endure both as payroll managers and as software providers. In the UK. We were of course expecting the health and social care levy to become a permanent new tax from April 2023. That was fixed, we were all plans, and we’re all ready to go for that. But nobody could have foreseen all of these changes that followed on soy. So a big congratulations to all of you for for getting through that and supporting your employees, your colleagues. With the many, many queries and communications you must have had to support around that time. Harper versus Brazil Harper trust, of course versus Brazil, made the calculation of holiday pay a lot more complex for an awful lot of employers. It is important to know that that is not a change in the legislation. Not yet nothing changed in the law at all. But it’s an interpretation of the existing law. Following the the the result of the Supreme Court resolution. And then the mini budget with Kwasi kwarteng and Liz truss, both very short 10 years in those roles but very impactful and for us in payroll certainly for the wrong reasons. Let’s look ahead to the coming year statutory rates, the personnel allowances are still frozen for the next five years that’s been extended until 2028. The new rates are applying to England, Northern Ireland and Wales Wales are permitted through the devolved government To change the percentages, but for the moment, they are still the same. Scotland have made changes, and we’ll see those on the the next slide after this one. But as these rates are fixed for the next five years at the moment, we do have certainty for the personal allowances. And we certainly hope the changes to national insurance will settle to after the awful time we had last year. The rates were frozen to help recoup some of the spending by the government over the last few years on furlough and COVID grants. And after the repeal of the removal of the 45% tax banding, you can see that the top banding of taxable pay has been reduced from 150,000 pounds a year to 125,140. We didn’t expect to see that this time last year either. So the income tax additional rate threshold, which is what that 125,000 pounds is being lowered. It’s the income level at which an individual would not have any personal allowances. That’s because one pound of every personal allowance is withdrawn for every two pounds of income above 100,000 pounds from the coming sixth of April. So that’s why it’s that number just in case, you were curious how they arrived at that number. So it’s the personal allowance times to over 100,000 pounds. I hope that makes sense. So the exchequer expects the impact for this to be an additional 420 million pounds revenue in the 23 year and it brings an extra 232,000 people into that top tax band. So that year on year there will be more and more people brought into that that tax band. And so we are looking by the 27th 28 tax year, an additional 855 million pounds additional revenue that’s that’s what’s that’s what’s currently forecast. So as I mentioned, there are some changes to Scottish income tax as well it is a little bit more complicated. As you can see there are more bandings Scottish pa Ye is determined by residency. So if your main place of residence is in Scotland, you are a Scottish taxpayer. Scottish Government also choose chose to reduce that top threshold to 125,140 pounds. And they’ve also added one pence to both the higher and the top rates. So the personal allowances but they are remaining frozen at 12,570 though, as in the rest of the UK. So the Scottish fiscal commission has forecast that this will also raise additional many millions of income tax for revenue for Scotland in the 2324 year. So some of the interesting impacts of the the the head different rates for those earning less than 27,850 pounds. That’s just over half of Scottish taxpayers, they will continue to pay slightly less income tax in the 2324 year than if they then if they lived elsewhere in the UK. Those earning less than 50,000 pounds a year we’ll see no change at all compared to 20 to 23. But people earning 50,000 pounds per year or more will be worse off and actually in that banding. They will be 1500 pounds worse off per year than the rest of the UK. So you can see these. All of these changes are designed for high earners to pay more tax. Quick Look at the sickness and parental leave statutory rates. Statutory parental pay is of course paid in whole weeks for the week that the sixth of April falls. So this year, it will be paid at the new rate from Sunday, the second of April. The high rate SMP might be 90% of average weekly earnings. Of course, if it’s lower than the 172 pounds that we can see here. The increases reflect the inflation rate rates which were 10.8% in the year to January 2023. I believe they’re running at something like 13.8 at the moment. So don’t forget to check SSP entitlement for your staff. Many companies pay occupational sick pay in excess of these values. is, so this entitlement is often overlooked or not recorded. If you’re not recording this, you could be missing linked period of incapacity for work or POWs. Or you might not be tracking that 28 weeks full entitlement correctly, just in case you do need to start paying SSP after the occupational sick pay expires. Student loans I won’t spend too long on this, I also I didn’t do a slide with the NIA tables, I’m sure you can find those. It’s not very interesting looking at lots of tables and figures. But the these are the changes to the bandings for employees repaying their student loans through the payroll, a post grad loan plus one of these others can run together. But do be aware that not more than one of the others can run concurrently. So for example, you can’t have a one and a two running together, there will be a plan five on the way. So this is a new plan for students who start an undergraduate course or not after the first of August 2023. So that’ll be probably won’t be hitting payroll for a couple of years yet, but that’s on the way, the threshold for that one will be 25,000 pounds per year. And the rate will still remain at 9%. I didn’t think I was going to have to put ir 35 into this presentation again. But here we are, again. It is one of the things like the 45% tax band changing that has been turned off and on again. So anyone with contractors in their organisation will be familiar with the off payroll workers process by now. But it’s here again, just to go through the consequences of the mini budget. As a refresher contractors could always self declare most would be sending invoices to their client as a limited company or a sole trader. And that might only attract corporation tax at 19%. Just as an aside, of course, the corporation tax is increasing to 25% from April 23. I’m sure you probably would have seen in the press the some of the impacts of have that for businesses in the UK. So the change of responsibility for declaration to the Hira, which was the IR 35 reform meant blanket changes to a lot of contractors becoming pa ye workers and paying tax and ni the same as employees, which was considered by some to be unfair. So Kwasi kwarteng announced the repeal of those reforms from April 2023. In the mini budget, that budget had a disastrous effect on the value of the pound and on inflation, with a lot of these sorts of tax cuts really widely criticised. 10 days later, there was a U turn on the proposed plans to abolish that 45 Pence tax rate. And the for the that 150,000 pounds banned, quasi was actually fired the same day. And then Jeremy Hunt’s the new chancellor, reversed the IR 35 repeal just three days later. So to all intents and purposes, that means nothing has changed for ir 35. So, minimum wage, if you joined my, my presentation last year on the legislative changes, we I thought that we might have been at age 21. This year, but a little bit premature. But you can see again, that the gap is still closing between the 23 and the 21 year olds. So I think next year, so again, I’m not a gambling person, so but I think I might put money on those two rates actually closing down completely and age 21 becoming the new minimum wage threshold. So when the minimum wage rates change, the increase applies to the first pay reference period, starting on or after the date of any change. When calculating your compliance with this rate, do be sure to make sure that any allowances including any salary sacrifice benefits are taken into account. There is a really long list on the government website for deductions allowable, and what counsellors pay what counsellors hours, there’s actually quite a few pages of it. So whilst your payroll system might support these calculations do please ensure that you check these regularly. We’re finding In salary sacrifice pensions being implemented more and more and so that’s that’s definitely one to keep an eye on to make sure that that doesn’t take your employees and your workers below that limit. So whilst the national minimum wage is statutory, the real living wage is voluntary and applies to employees aged 18 or over Cypher is a living wage employer. So we’re really proud of that. The new living wage rate was actually that was announced on the 22nd of September last year. Since it’s voluntary, there is actually no fixed, increased date. But employers are asked to implement the rise by the 14th of May 2023. The gender pay gap reporting requirements had extended deadlines during 2020 due to the lockdown. But now they’re back to regular requirements. This had an unexpected effect that the ONS considered 2022 being uncertain years statistics. And actually I couldn’t find the pay gap figure on their website. That’s the Office for National Statistics. Of course, their website is a really fascinating source of data. If you do have time to go and have a look, there’s some really amazing charts on there. And the gender pay gap. results on on the pages do display other factors affecting the pay, including age, qualifications, region and ethnicity. So it’s really worth a look, I do encourage you to go and take a look there. So I mentioned ethnicity pay gap last year as well. And I expected there to be further news, particularly in the light of Baroness Ruby MacGregor Smith’s review. There’s a link to it on this slide. Again, it’s a really good read really fascinating read. But there still is no mandatory reporting requirements. The b e i s conducted a consultation in 2019, which recommended reporting for companies with 50 plus employees. Of course, that’s less than the requirement for gender pay gap, which is still 250. But the government would prefer to have an ethnicity pay gap reporting remain voluntary. 11% of employers reported in 2018. But this rose to 19% in 2021. So we can see there is an upward trend. It can demonstrate that company is serious about tackling inequalities, but it also makes really good business sense. And that’s something that we’ve been looking at, again, here at Cypher for our own recruitment policies, ethnically and culturally diverse businesses can see up to 36% more profitability. So it absolutely makes sense. Ah, Harper trust versus Brazil. So really not I’m sure none of you are going to miss this bit of news and the case law outcome. To the background to it was the MS. Brazil, it was a music teacher at Harper trust, she was employed on a permanent contract. But for time time only. She was only paid for the hours that she taught, which varied from week to week. And so the trust following that, then a CAS guidance, multiplied the hours that she worked by 12.07% and then multiply that figure up by her hourly rate of pay. That sum was then paid as as holiday pay. And, you know, this is or is was a method that was used really widely across all sorts of different industries and certainly across our customer base here at Cypher as well. But in this unanimous verdict, the Supreme Court rejected the trust’s arguments for the basis of that calculation, and ensure it confirmed that the entitlements of 5.6 weeks holiday applies to full and part year workers in full without prorating. So for those with no normal working hours pay ought to be calculated by reference to the hours worked over a 52 week average, rather than limited by the number of hours the worker has actually worked. It’s so confusing. So the entitlement to the the calculation of the entitlement, of course could be different to the calculation for the pay. This is having such an impact on on payroll and HR teams. It’s including not only term time only workers in schools and other establishments, but seasonal work because those on zero hour contracts bank staff, maybe even workers engaged under umbrella contracts. So it’s it’s impacting employers across different sectors like schools, colleges, care homes, NHS, recruiters, and manufacturers who rely on permanent zero hours. Workers. So part yeah, I’ve just thought of something else, actually, as well. And actually, I’m going to touch on this in a moment. But, of course, the 5.6 weeks is based on the statutory requirement for four weeks plus eight bank holidays. This is another year like last year where we’ve got an additional bank holiday. So actually, that it could be that that’s 5.8 weeks. It’s all down to interpretation. So, so the 5.6 weeks, calculated using a holiday entitlement reference period, to determine average weekly pay, should they ignore any weeks in which they didn’t work. So unless you’ve, you’ve got a timesheet system, or a time and attendance system, there’s absolutely tracking, the weeks worked and the time worked in each weeks, it’s going to be almost impossible for us to have this absolutely 100% fully accurate and compliant. Another interesting kind of spin off of this as well is if you if you if you do study this calculation, part year, workers actually could end up with a larger holiday entitlement than part time workers who were doing the same number of hours across the year, it is mind boggling. So with that in mind, you can see this, I’m glad that we’ve just managed to squeeze this in the deadline for for this is today on this consultation. But the BIS as you do have a current consultation, you can still get your voice heard today, I would absolutely encourage you to to follow that link and go and have your say about the way holiday is calculated. And that fairest way for us to do that. But also the most logical way for us to do that as payroll managers with the data that we have in our systems. So these are some of the examples of the questions in that. In that consultation, and you’re asked to say whether you strongly agree, agree, neither agree or disagree, disagree strongly agree, don’t know. So it’s I think we do need further advice as employers and as software providers for really clear guidance on on how pay for holiday should be calculated. Yeah, so please, please get involved if you can. So a little news round up, we’re nearly coming to the end of the presentation. So during the pandemic, just won the right to work checks. Of course, employers were permitted remote document checks. This was extended to September 2022. But now you do, of course, once again need to be checking and copying original documents, like passports and visas. There is a new share code that workers can create online when they validated their identity on the.gov. website. So if they provide this to an employer, actually, they don’t also need to provide the documentation. So there is still a you know, an alternative way to to do those Right to Work checks. pensions or to enrollment. Participation in the private sector stays at around 15 point 3 million people, which is really great for pension savers. It’s been a really great story. The trigger for the auto enrolment has been 10,000 pounds a year since it was introduced 10 years ago. Can you believe how long ago that was now. So so actually with inflationary increases to pay over time, this has effectively brought more people into saving for pensions. And again, that’s a really good thing. studies have been conducted, though, to test the effect of changing that trigger point. So so if it’s aligned with the lower earnings limit for National Insurance, that would bring 203,000 more people into pensions. If we look at it the other way and align with the personal income tax allowance level, that would actually decrease the number of pension savers by 150,000 people. So you can see it’s a you know, either end of that is actually really significant impact. So the government have decided to maintain the trigger at the 10,000 pounds to bring as many people as possible into the pension saving, but avoiding those unlikely to benefit. So I guess if your earnings are very, very low, then perhaps he would opt out anyway. There will be a new system though this was quite good news for a system of top ops for workers earning below the personal allowance using the net pay arrangement. This is going to be introduced from the 20 for 25 years. So hopefully, I can give you more details on that in the in the next year’s presentation. But, of course, those earners don’t currently benefit from the 20% tax relief that high earners really receive. So this measure looks to even out that that inequality. So I said that I was really pleased to to see that piece of news. Work From Home tax relief is back to regular rules that six pounds per week relief, if your job requires you to live far from your office, or that there’s no office at all. So you can’t claim tax relief if you choose to work from home. So that includes if your employment contract lets you work from home some or all of the time, or you work from home because of COVID-19 or your employer has an office, but you can’t go there sometimes because it’s full. So So that’s totally back to the the regular rules again. It used to be that even if because of COVID and lock down, you even just for one week, you had to work from home. You could you could claim that allowance for the whole year. So that’s gone. Okay. Yeah, call it days. So we’ve got three bank holidays, again, of course, it’s coronation of the king. On the so we’ve got an extra bank holiday on Monday, the eighth of May. So so do take a look at your approach to that this year. I would imagine it will be exactly the same as for the Queen’s Jubilee last year where we also has a an extra bank holiday. But do check the wording in your employees contracts of employment. So for example, where the contract entitles employees to take leave on all bank holidays, and public holidays, you’re going to have to require you are going to have to grant that extra day as leave. I’m sure you all will anyway. Also, if there is a chance that you might have week 53 payroll this year, the fifth of April falls on Wednesday. So do check. I mean, if you’ve got a to weekly payroll, of course, that could mean that you’ve got a week 54 that is also the bank holiday week. So we’ve got good Friday. So if you’ve brought your weekly pay day forward, you know from a Friday or a Thursday to the Wednesday just to keep an eye on that and make sure that your payroll software is applying the correct tax allowances for that payday. Okay. So that’s the end of my presentation. I’ll hand back to Katherine to wind up.

28:39
Thanks so much, Amanda. It’s amazing what you can cram into half an hour and all of that lovely payroll legislation stuff. So as a reminder, if any of you join late or you want to revisit parts, you will get a copy of this recording in March you automatically. We have time now to Amanda to answer your questions, if you have any. We have one that I can kick you off with Amanda and Helen. She asked our first fortnightly payroll in April pays on the sixth of April and covers work the end of march up to 31st of March, because it pays in April, will they have to apply the new national minimum wage rates even though the work took place in April?

29:19
So the yes, it refers to the pay reference period. So sorry, there was a lot of information in that question. So the pay reference period is from covers March but the Pay Day is the sixth of April. So I believe you should. Uh, can I come back to you on that and check that for you?

29:44
Yeah, and Helen, we’ve got your contact information. Amanda will double check that and we can email you separately with your answers that that’s the problem with all these payroll questions. They can be quite tricky and we need to just make sure don’t want to get into payroll Um, okay, um, time for any other questions if anyone has any, if not, we will wrap up. Okay, amazing. So as I said, if you’re watching this live, you will get a copy of the recording and you can share that with a colleague or rewatch it again at your leisure. If you want to learn more about any of Cyprus, HR and Payroll solutions, we offer integrated HR Payroll Software, as well as outsourced payroll, all of that good stuff, and you can visit our website or you can opt in for more information and using the exit survey that will come on your screen at the end of the broadcast. That broadcast that survey. Sorry, also our super bit of feedback about today, which we always appreciate you filling in our next webinar is an employment law update with our friends at Choose list. Visit bit bit.ly/ly employed 23 To save a spot and join us live on Tuesday, the 25th of April at 11am. That promises to be a really good one. So we hope you can join us then. And thank you so much, Amanda, appreciate your help and expertise as always on today’s broadcast. And thank you to our audience for joining us. We appreciate you being here. We hope you have a great rest of your day and I’ll see you again soon. Take care. Thank you. Bye.

31:12
Thank you very much. Bye bye