From 6th April 2023, the Government’s new annual statutory rates come into effect with potential implications for both employers and employees and whilst some of the changes are more technical in nature than others, the headline amendments are set out below:
Tax and National Insurance
In terms of income tax, the personal allowance (that being the amount an employee can earn before having to pay tax) will remain at £12,570 although there will be significant changes to the thresholds at which the basic, higher and additional rates of tax will be payable.
Currently, earnings between £12,571 – £50,270 fall into the basic rate bracket of income which essentially means those are taxed at 20%. Under the new rates, the basic tax bracket will be narrowed substantially with the threshold dropping to £37,700. This means that any earnings between £37,701 and £125,140 will now fall into the higher rate band (40%). Any amount earned over £125,140 will be taxed under the additional rate band (45%).
This does mean that thousands of employees across the country are very likely to find themselves in a higher tax bracket with subsequent impacts on their take home pay.
From an employer’s perspective, this change to the tax banding does mean that employers should ensure their payroll and accounts department are up to date with the proposed changes and that their employees are paying the correct amounts in tax via PAYE. Many payroll systems will be sophisticated and automatically update, but employers should check.
National Insurance has also been the subject of much discussion and after an increase and subsequent reversal of the rates over the past year, the amount payable on earnings between £12,571 – £50,270 will fall from 13.25% under the current rates to 12% from 6th April 2023. Earnings of £50,271 and above will be subject to National Insurance at 2%.
From an employer’s point of view, National Insurance contributions for most of its employees will be reduced from 15.05% to 13.8% and, again, employers should ensure their payroll and accounts departments are fully aware of and prepared to implement these changes.
National Minimum Wage
The National Minimum wage is to increase from £9.50 for those aged 23 and over to £10.42. Similarly, for employees aged between 21 – 22 the amount will increase from £9.18 to £10.18 and from £6.83 to £7.49 for employees aged between 18-20.
All employees have a statutory right to be paid in line with the National Minimum Wage and if an employer fails to meet the new National Minimum Wage an employee will very likely be able to pursue a claim for the balance.
Statutory Maternity Pay
Whilst SMP for the first six weeks of maternity leave will remain at 90% of the employee’s average weekly earnings, the rate for the remainder of the time an employee is on maternity leave will now be £172.48 or 90% of the employee’s average weekly earnings, whichever is lower.
Should an employer fail to pay a qualifying employee the correct maternity pay, this may result in an actionable claim to recover any unpaid amounts as well as a potential claim for pregnancy and maternity discrimination.
The same figures also apply to paternity leave, shared parental leave, adoption leave and bereavement leave.
Again, and especially in light of the above, these figures should be kept in mind by employers that have employees due to begin maternity leave, paternity leave, shared parental leave, adoption leave or bereavement leave in the coming weeks.
Statutory Sick Pay
The amount of Statutory Sick Pay to which an employee is entitled depends on the number of qualifying days they work each week and the calculations in respect of that can become quite technical. In any event, the maximum weekly amount an employee may receive is set to increase from £99.35 to £109.40.
Should an employer fail to pay Statutory Sick Pay to a qualifying employee following the uplift on 6th April 2023, that may provide an employee with an actionable claim to recover the outstanding amounts.
If you have any questions about how the above changes may impact you or your business, please do not hesitate to contact our specialist employment team either by phone or at email@example.com