PIXIE PAYROLL Blog

The timing of this has moved around a bit over the last couple of months but finally on Thursday, the new Chancellor of the Exchequer stood in parliament to deliver his Autumn Statement. It included changes to wages, pensions, benefits and taxation and so as we traditionally do, here’s a rundown of some of the details.

National Living Wage

With inflation so high, the Chancellor announced that the National Living Wage rate for those over 23 will increase to £10.42ph in April, up from £9.50ph now. The National Minimum Wage rates will also be increased for people aged 21-22 by 10.9% to £10.18 an hour, for those aged 18-20 by 9.7% to £7.49 an hour, for 16-17 year olds by 9.7% to £5.28 an hour, and for Apprentices by 9.7% to £5.28 an hour.

Income tax

Whilst no announcement was made about plans to either increase or decrease the rate of income tax, there is a plan to freeze personal allowances until April 2028. That means that, as pay increases, more people might start paying tax for the first time, or more people might tip into the higher rate.

The threshold for paying the highest rate of income tax, which is 45%, has been reduced to £125,140 from £150,000. This is a complete reversal of the situation in September, when it was announced that the 45% rate would be scrapped altogether.

Pensions & benefits

After months of speculation, it was confirmed that the ‘triple lock’ on pensions would be retained, which means the state pension will rise by 10.1% or £780 per year. In addition, pensioner households will receive £300 to help pay for energy bills. There is a review into the state pension age due in early 2023 so for some, the age they might retire at could change.

Benefits will also rise by 10.1% and those on means-tested benefits will receive a £900 cost of living payment – details on how that will be paid will be announced soon.

As always, if you need any help with working out what the budget will mean for your payroll and staff costs, just get in touch. A rundown of some of the other announcements made today around things such as windfall tax, capital gains tax and energy price cap can be found here: https://www.bbc.co.uk/news/business-63555313

The pandemic has ushered in many changes to the way we work including working from home and flexible working. But another change to our work week could be on the way soon – the four day week. Labour MP Peter Dowd has recently tabled a bill in parliament that would reduce maximum working hours from 48 to 32.

Around 70 companies in the UK are currently taking part in a pilot to see how a four day week might benefit their employees, their company, the economy and even the environment. Around 3,500 employees have been working a four day week with no loss of pay and an extra day off in the week. They can do what they like on that day – rest, life admin, volunteering or hobbies. Some are using it to reduce the cost of childcare or to help cope with other caring duties.

The deal these companies have made with their employees is based on a principle of the 100:80:100 model. Employees get paid 100% of their salary for working 80% of the time but commit to keeping to 100% of productivity.

On paper, it’s not difficult to see why a four day week might be attractive for employees but why are employers also very interested in the idea?

Benefits to employees

An extra day away from work each week can have more than just practical benefits for employees. More rest, time spent with family and friends or doing hobbies; or simply keeping on top of all those annoying bits of admin can lead to a real boost in work/life balance and noticeable mental health benefits.

Going to work costs money so one less day in the office can help employees with the increased cost of living, especially if it reduces childcare or travel costs.

Benefits to employers

There is evidence to show that moving to a four day week model actually increases productivity and boosts profits because of lower costs.

What’s more, employers who are offering a four day week will be able to attract the best talent and retention of those employees will be easier. Sick days will be reduced and incidences of stress and mental health issues should reduce.

Benefits to the environment

Working four days per week frees up employees to be able to lead a more sustainable lifestyle – they can grow their own food, cook from scratch or choose active travel options such as cycling.

And of course, it’s one fewer day each week when the car will be on the road or energy is used for all the office-based equipment.

Is a four day week right for your business?

A shorter working week won’t work for all companies and some employees might not be interested in the idea either so flexibility is going to be key. But if it’s something you want to explore further, start a conversation with your staff, perhaps via the HR department to see whether it’s something they’d welcome. If you have a union rep as one of your employees, it would be worth engaging with them too.

It will be important to reassure the team that it isn’t something you’re considering due to financial pressures and that they will still be paid the same. In fact, the only thing that won’t change if you move to a four day week, even on a trial basis, is your payroll!

The new Chancellor of the Exchequer Kwasi Kwarteng gave his mini-budget in parliament on Friday which actually turned out to contain some fairly major announcements. It contained some quite unexpected changes which the government hopes will drive growth and help with the cost of living crisis.

National Insurance

As was reported on Thursday, the Chancellor confirmed that the recent rise in National Insurance will be reversed and plans for the Health and Social Care Levy have been scrapped.

This means that from 6^th November, rates of National Insurance will go back to where they were before April so we will all see a bit more money back in our pay packets. The increase in the NI threshold that came into effect in July will be retained.

Income Tax

This announcement did come as a bit of surprise. There was always a plan to reduce the standard rate of income tax to 19% but that will now come from April 2023, a year earlier than originally planned.

In addition to that, the highest rate of income tax for those earning over £150,000 has been abolished so everyone earning more than £50,270 will pay 40%.

These changes mean that everyone who currently pays income tax will also see a bit more money in their pay from next April.

Corporation Tax

Another tax increase has also been cancelled. Companies were due to see their rate of corporation tax increase from 19% to 25% in April 2023 but this won’t now be happening.

Universal Credit and part time working

There will be new rules around looking for work and trying to increase earnings from January for those on Universal Credit. At the moment, anyone earning less than the equivalent of 9 hours per week on the National Living Wage has to meet regularly with a work coach and are expected to apply for new jobs or increase the hours they work at their current workplace.

From January, that will apply to anyone earning less than the equivalent of 15 hours per week with sanctions if the requirements are not complied with.

Other announcements

The Chancellor also announced that stamp duty thresholds will increase which means the cost of buying a new home will reduce.

He has also cancelled plans to increase the rate of duty on beer, cider, wine and spirits.

And finally, he said that the government will investigate setting up infrastructure and investment zones across the country where tax and planning rules could be relaxed to drive innovation and growth.

So all in all, that’s quite a lot to take in from what was billed as a ‘mini-budget’. It will also change the amount employees get to take home in their pay packets which, along with the freeze in energy costs also recently announced, may help with some aspects of the cost of living crisis.

If you’d like information on how the changes affect your employees or your overall staff costs, just get in touch.

As I write this, we are into the last few days of summer and this time of year always makes me think of back to school and new starts, even though it’s been a long time since I was sewing name labels into clothes and will be a while yet before my grandson needs a school uniform.

So, for this month’s blog, I thought I’d take a look at a couple of aspects of back to school – ongoing training for you or your employees, and support for childcare costs.

Continuous Professional Development

Otherwise known as CPD, regular training and updates are a mandatory requirement for some professions and something worthwhile and productive for others. I myself do regular CPD to ensure I’m always up to date with the latest payroll legislation and as part of my Membership of the Chartered Institute of Payroll Professionals.

CPD in itself won’t have an effect on your payroll although you may be able to claim tax relief for the cost (as would someone who is self-employed). But being flexible around CPD in terms of allowing time off for study or exams, creating a supportive environment and structuring work to allow for real-time experiences will all be beneficial to your employee and make them more likely to stay on once their study is completed. Your business will also benefit from enhanced workplace skills and possibly more services you can offer clients and customers.

Help with childcare costs

With the summer holidays nearly over and life getting back to normal soon, many families will be getting back into a pattern of school, work and childcare. So we thought an update on support available to help pay for childcare might be useful.

Working parents (including those on parental leave, holiday or sick leave) can qualify for tax-free childcare; for every £8 the family pays into their childcare account, the government will contribute £2. The money can be used to pay for afterschool clubs and playschemes as well as childminders and nurseries.

There are some limits and qualifying criteria for tax-free childcare and more information can be found here: https://www.gov.uk/tax-free-childcare?step-by-step-nav=d78aeaf6-1747-4d72-9619-f16efb4dd89d

A contribution towards childcare can also be made if the parents are receiving Universal Credit or Working Tax Credits. Click the links for more information about how to check eligibility and apply.

The pre-school years have some specific tailored support. Parents and caregivers on selected benefits can get free education and childcare for 2 year olds. All 3 and 4 year olds receive 15 hours per week of free childcare with an approved childcare provider and some families can get 30 hours per week.

More information about childcare support for 2-4 year olds can be found here: https://www.cornwall.gov.uk/schools-and-education/pre-school-and-early-years/childcare-and-funding/

We hope you have had a good summer and have been able to enjoy some relaxing time away from work. Get in touch if you have any queries about payroll or want to start the new term afresh by asking me to manage your payroll for you.