| PAYROLL
Sarah Bradford, Editor-in-Chief, Pay & Benefits Adviser |
What the Autumn Statement Means for Employers
The Chancellor, Jeremy Hunt, presented his Autumn Statement this morning against a backdrop of difficult global economic conditions. He outlined three priorities – stability, growth and public services, and set out steps for achieving these, including tax and spending measures designed to help repairs public finances.
Personal Tax
The income tax rates remain unchanged – the basic rate is to stay at 20%, the additional tax at 40% and the additional rate at 45%.
Previously, the Government had announced that the personal allowance would remain at its current level of £12,570 until 6 April 2026. It has now been frozen for a further 2 years and will remain at £12,570 until 6 April 2028. This is equivalent to £252 per week and £1,048 per month.
The basic rate band was also due to remain at £37,700 until 6 April 2026. This too will be frozen at this level for a further 2 years, meaning that the point at which an employee with the basic personal allowance starts to pay higher rate tax will stay at £50,270 until 6 April 2028.
However, the threshold at which the additional rate of tax becomes payable will fall from £150,000 to £125,140 from 6 April 2023. The new starting threshold is the point at which the personal allowance (reduced by £1 for every £2 by which income exceeds £100,000) is fully abated. The reduction in the additional rate threshold will mean that employees earning £150,000 and above will pay an additional £1,243 in tax in 2023/24.
National Insurance
The point at which employees start paying National Insurance contributions (the primary threshold) was aligned with personal allowance from 6 July 2022. The primary threshold will, like the personal allowance, remain at £242 per week, £1,048 per month and £12,570 per year until 6 April 2028.
The starting point for employer contributions (the secondary threshold) also remains frozen at £175 per week, £758 per month and £9,100 per year until 6 April 2028. Higher thresholds apply where the employee is under the age of 21, an apprentice under the age of 25 or an armed forces veteran in the first year of their civilian employment since leaving the armed forces. In each case, the threshold is aligned with the upper earnings limit (set at £967 per week). A higher secondary threshold (of £481 per week) also applies to the earnings of a new Freeport employee where the employer has physical premises in a Freeport tax zone.
The employment allowance is also unchanged, remaining at £5,000 for 2023/24.
National Living Wage and National Minimum Wage
The National Living and National Minimum Wage will increase in line with inflation – an increase of 9.7%.
From 1 April 2023, the National Living Wage, which is the minimum wage for workers age 23 and above, will rise to £10.42 per hour. From the same date, the National Minimum Wage for workers age 21 and 22, increases to £10.18 per hour, the rate for workers aged 18 to 20 increases to £7.49 per hour and the rate for workers aged 16 and 17 to £5.28 per hour. The apprentice rate is increased to £5.28 per hour and the accommodation offset where accommodation is provided will rise to £9.10 per day.