Employer’s guide to UK payroll legislation for the tax year 2022/23

It's that time of the year again. Payroll legislation is getting an upgrade - new rates, new thresholds, it can be hard to keep up. But new tax year updates are essential. And HMRC doesn't pay heed to the defaulters; lack of HMRC compliance can turn costly very quickly.

To help ease the transition, we've compiled a list of the critical updates you should be aware of for the 2022/23 tax year. All figures apply from 6th April 2022 to 5th April 2023.

Income tax rates and thresholds

Starting 6th April 2022, new rates and thresholds apply to all employees. The amount of Income Tax you deduct depends on the employee's tax code and how much of their taxable income is above their Personal Allowance. The majority of thresholds will not change this year apart from the income tax rates for Scotland.

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Health and Social Care Levy

From April 2022, a new Health and Social care Levy will be introduced across the UK to pay for reforms to England's care sector and NHS funding. For the tax year 2022-23, national insurance contributions will increase by 1.25% and will apply to those who pay Class 1 (employee and employer), Class 1A and 1B and Class 4 (self-employed) NICs. The levy will be administered by HMRC and collected through your payroll.

Existing employer reliefs and allowances that apply to National Insurance contributions will also apply to the levy.

Payslips will also need to display the following messages from April 2022:
"1.25% uplift in NICs, funds NHS, health & social care"

From April 2023, employers need to report the levy as a new item through payroll. You will need to show it on payslips as a separate 1.25% levy for employees who have to pay it.

Here’s what it will look like in effect for 2022/23:

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National Insurance holiday for employers of Veterans

In April 2021, HMRC introduced a zero rate of employers’ Class 1 National Insurance contributions on the earnings of a qualifying veteran. You’ll apply the zero rate up to the Veterans upper secondary threshold.

From 6th April 2021 to 5th April 2022, you’ll need to pay the secondary Class 1 National Insurance contributions as normal and then claim it back from 6th April 2022 onwards.

To claim the relief, you’ll need to confirm that the veteran qualifies. An employee qualifies as a veteran if they have either:
- served at least one day in the regular armed forces
- completed at least one day of basic training

The relief is available to a veteran who has started their first civilian job regardless of when they left the regular armed forces. You can read more about National Insurance contributions relief from HMRC here.

You need to keep records that show:
- that an employee is a qualifying veteran
- the start date of the veteran’s first civilian employment

You can ask the veteran for their:
- Discharge papers from HM Armed Forces
- Employment contract with their previous employment (in order to determine the start date)
- Identification card (which shows their time in the armed forces)
- Letter of employment or contract with HM Armed Forces
- P45 from leaving HM Armed Forces

You’ll need to keep records that show the employee’s eligibility for at least 4 years. From tax year 2022/23 onwards, you’ll be able to apply for the relief in real-time by using National Insurance category letter V for qualifying veteran employees.

Here’s an example of Veteran NIC savings from 2022/23:

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Freeports Employer National Insurance relief

The government has announced that they will include Employer National Insurance Contributions (NICs) in the wider Freeports initiative. They’ll apply a reduction in the rate of employer NIC’s for all Freeport based businesses. The reduction will apply to employers located within a prescribed geographic area and only for employees working in that area.

This change in rate would apply a zero-secondary rate of employer NICs for all employers based within (and employing people working within) the Freeport geographic area. The rate would affect employee earnings above the secondary threshold, up to and including a new Freeport Upper Secondary Threshold (FUST). Balance of earnings above FUST would be charged at 13.8%.

• For an employer to be eligible they must have physical premises in the Freeport tax site.
• The employee must be a new hire after April 2022 and cannot have worked for that employer (or connected to the employer) in the previous 24 months. The employee must spend 60% of their working time on the Freeport tax site. There is no limit on the number of employees an employer can claim for.
• Eligibility to claim will expire 36 months from the employee’s start date of employment. Employers will self-assess eligibility for the relief using available guidance from HMRC.

Read more about Freeport Employers NIC relief.

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Statutory Maternity, Paternity, Adoption, and Shared Parental Pay

Starting 3rd April 2022, the rules for Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) and Statutory Adoption Pay (SAP) will be updated. You can also use the maternity, adoption and paternity calculator for employers to work out your employee’s:
- Statutory Maternity Pay (SMP)
- Paternity or adoption pay
- Qualifying week
- Average weekly earnings
- Leave period

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Statutory Sick Pay (SSP)

The same weekly Statutory Sick Pay rate applies to all employees. However, the amount you must actually pay an employee for each day they’re off work due to illness (the daily rate) depends on the number of ‘qualifying days’ they work each week.

You can also calculate your employee’s SSP using the HMRC SSP calculator.

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Student loan and postgraduate loan recovery

Find guidance below on updates to the rates for student loan and postgraduate loan (PGL) deductions for your employees, depending on their specific situations.

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National Living and Minimum Wage

See current national living and minimum wage rates in the table below, by age group, from age 19 and up. The table covers current minimum wage rates and changes starting from 1st April 2022, and shows the percentage increase for each age tier.

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Key dates and deadlines

Register for payroll benefits

You must register before 6th April 2022 to be ready for the 2022 to 2023 tax year.

If you sign up for payroll now, your employees can pay the tax due on their benefits and expenses when they receive their pay in the tax year 2022 to 2023. You will then be able to show your employee how much tax they have paid for their benefits and expenses on their payslips. Once you start payrolling you no longer need to submit P11D returns to HMRC for almost all benefits in kind. Register using the Payrolling Benefits and Expenses Online Service.

Report employee expenses and benefits

You must report expenses and benefits to HMRC by 6th July 2022. Class 1A National Insurance due must be paid to HMRC by 22nd July 2022.

Give P60s to employees‍

You must provide a P60 to all employees on your payroll who are working for you on the last day of the tax year. The P60 summarises their total pay and deductions for the year. You must give your employees a P60 by 31st May 2022.

Make the new tax year a breeze with Pento

At Pento, we take care of the tax year changes for you. We also keep you informed of all the new payroll legislation updates as an added convenience. Here's how we are welcoming the new tax year at Pento:

• Rates and thresholds for income tax, loans, statutory pay are automatically updated.
• We automatically report P11D and P11D(b) on the employer's behalf.
• We send P60s automatically to all employees.
• Final drafts of P11Ds and P60s are available for employers to review before we report them to HMRC.
• Starting April 2022, payslips will include the HMRC recommended message around an increase in National Insurance contributions.

With Pento's automatic updates, employers don't have to worry about tax miscalculations and remembering updated legislation.

If you are looking for a payroll solution that you can rely on for the end of the tax year duties, new tax year updates, and everything in between, Pento is just for you! Talk to us today and learn how a modern payroll automation platform and a team of CIPP qualified experts can ease your payroll pains.