6 Mins
Payroll year end is approaching, which means it’s time for employers to start planning and taking action to ensure everything is in place for the completion of 2022-23 and the transition into 2023-24.
We will issue a full payroll update after the budget on 15th March, but meantime, here are 5 things which are time sensitive, so we would recommend that you take some time to consider these now.
- Check the integrity of your employee data
- Employment allowance
- Apprenticeship Levy
- Payroll benefits in kinds
- National minimum wage
Employee Data Integrity
It is essential for employers to ensure their payroll records are accurate and up-to-date.
They need to make sure that all employee information, such as addresses, National Insurance numbers, and salary/hours details, are correct.
Not only is this a legal requirement in terms of GDPR, but it also builds employee trust and confidence, and ensures the correct information is being reported to HMRC via RTI submissions.
It is easy for an employee to forget to say they have moved house, or for a change in hours worked to be omitted from the payroll/HR record, so having a procedure in place to review this will ensure things like this are picked up and corrected.
It is good practice to check the integrity of your payroll data ahead of the payroll year-end, this means you are going into the new tax year with accurate information, and your employee’s P60s show the correct address details.
Another thing to consider at this time is inactive employees. Are they truly temporarily suspended, or has their employment actually ended? If you need any help then please, get in touch.
Employment Allowance
In payroll we often find employers don’t know all the ins and outs of Employment Allowance. With that in mind, here are the 6 most common questions we receive about this allowance.
- Can every company registered as an employer claim this allowance?
This allowance is aimed at small to medium employers, and the allowance is used to reduce the Employers’ national insurance bill. Therefore, if your company has National Insurance levels of over £100,000 in the previous tax year, then the company will not be eligible for EA.
- I have several companies within a group – can each company claim employment allowance?
Only one company within a group (or with connected companies) can claim employment allowance, and the £100,000 employers NI threshold must be measured across the entire group.
- I’m a sole director – can my company claim this?
If there is only one person paid above the secondary NI threshold, and this person is a company director, then employment allowance cannot be claimed. However, if there are several people on the payroll above this level, the company becomes eligible.
- Do I have to pay back employment allowance?
Employment allowance does not have to be paid back to HMRC. This allowance is created to reduce the overall payroll cost of employing staff.
- My business is unlikely to use the full £5,000 for the 2022/23 tax year – can I still claim?
Absolutely – the company does not need to use the full £5,000 in order to qualify.
- What is de-minimis state aid and how does it affect employment allowance?
In simple terms, de-minimis state aid is financial support from the government, and for some businesses employment allowance counts towards their de-minimis state aid a limit.
If you have received de-minimis state aid, you should have been told in writing.
There’s a limit to how much de minimis state aid businesses can get over a 3-year period, so if they exceed the limit, they cannot claim Employment Allowance.
The aid limits are:
| Sector | De minimis state aid limit over 3 years |
| Agriculture products | € 20,000 |
| Fisheries and aquaculture | € 30,000 |
| Road freight transport | €100,000 |
| Industrial/other | €200,000 |
The decision to claim employment allowance is not always a straightforward matter, and it should not be left to your payroll team to decide. A link to further guidance is here, but if you require help with this please get in touch.
Apprenticeship Levy
The Apprenticeship Levy is a tax that employers with a payroll of over £3 million must pay to the government to fund apprenticeship programs. The aim of the levy is to encourage more employers to offer apprenticeships and to increase the number of apprenticeships available.
The Apprenticeship Levy is set at 0.5% of an employer’s payroll bill, minus a £15,000 annual allowance. For example, if an employer has a payroll bill of £4 million, their Apprenticeship Levy liability would be £5000. (0.5% of £4 million less £15,000 annual allowance).
Employers who are required to pay the Apprenticeship Levy are those with an annual payroll of over £3 million. This includes businesses, charities, and public sector organizations. The levy applies to all employers who meet the payroll threshold, regardless of whether they have apprentices or not.
The Apprenticeship Levy allowance for a group of connected companies is £15,000 an employer’s payroll bill is less than £3 million, they are not required to pay the levy.
If an employer is part of a group of connected companies, they will need to share the Apprenticeship Levy allowance with their connected companies. The allowance for a group of connected companies is £15,000 per year, which can be shared between the connected companies.
Note that the decision on how to share this allowance between the companies in the group must be made at the start of the tax year and cannot be changed part-way through the year.
A link to further guidance is here, but if you require help with this, please get in touch.
Payrolled Benefits in Kind
Payrolled benefits in kind (BIK) refer to non-cash benefits provided to employees by their employer that are included as taxable income for the employee. Examples of BIK can include company cars, private medical insurance, gym memberships, and low-interest loans.
Payrolling BIK means that the employer calculates the tax due on the BIK and deducts it from the employee’s pay each pay period, rather than reporting it at the end of the tax year on a P11D form. This can help to spread the tax cost over the year for the employee, as well as reducing the administrative burden for the employer.
Payrolling BIK was introduced by the UK government in April 2016 as an option for employers to simplify the reporting and payment of BIK for their employees. However, it is not mandatory, and employers can still choose to report BIK on the traditional P11D form.
By payrolling BIK, employers can ensure that tax calculations are done in real-time and are therefore more accurate, reducing the risk of unexpected tax liabilities at the year end.
By payrolling BIK, employees can see the value of their benefits on their payslips each month, rather than having to wait until the end of the year to see the tax impact. This can improve their understanding and appreciation of their benefits package.
However, Payrolling BIK is not suitable for every situation, whilst it can reduce the administrative burden on employers, benefits are being looked at every month rather than once per year, so you really have to weigh up if it is the right choice for you.
If you do decide to payroll your benefits in kind, you must remember to register with HMRC for this service before 6th April.
A link to further guidance is here, but if you require help with this, please get in touch.
National Minimum Wage
The national minimum wage is a legal requirement that employers in the United Kingdom must follow.
The national minimum wage in the UK is currently set at £9.50 per hour for workers aged 23 and over. For workers aged 21-22, the rate is £8.36 per hour, and for those aged 18-20, it is £6.56 per hour. For workers under the age of 18, the rate is £4.62 per hour, and for apprentices, it is £4.30 per hour.
These rates will increase on 1st April 2023, and the new rates are set out below:
| Band | Current Rate | From April 23 | Increase |
| National Living Wage (23 years old and over) | £9.50 | £10.42 | 9.7% |
| National Minimum Wage (21-22 years old) | £9.18 | £10.18 | 10.9% |
| National Minimum Wage (18-20 years old) | £6.83 | £7.49 | 9.7% |
| National Minimum Wage (16-17 years old) | £4.81 | £5.28 | 9.8% |
| National Minimum Wage (apprentice rate) | £4.81 | £5.28 | 9.8% |
| Accommodation Offset | £8.70 | £9.10 | 4.6% |
As you can see this is a significant increase. If you have employees who are paid at or around the minimum wage rate, you may wish to do some cash flow forecasting to assess the impact of this increase on your business.
Additionally, if you have any salary sacrifice arrangements, such as pension, cycle to work or childcare, this increase could potentially see the post-sacrifice pay for some employees fall below the National Minimum Wage level, so now is the time to look at this and check for potential issues.
A link to further guidance is here, but if you require help with this topic, please get in touch.