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10 payroll changes to expect in 2023

10th Jan 2023
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Payroll processors may be feeling some level of uncertainty about 2023. When it comes to the government, 2022 was an unpredictable year. There was a lot to take in between U-turns on tax policies and IR35 legislation. Not to mention how we changed Prime Ministers like it was going out of fashion.  

It seems it’s become hard to predict what’s in store for us in the next month, let alone the next year. To help keep you in the loop, we've put together a list of changes payroll processors should expect or look out for in 2023. 

10 payroll changes to look out for in the coming year

1. National Living Wage and Minimum Wage increase 

From 1st April 2023, there will be a rise in the National Minimum Wage and the National Living wage rates

2. Lowering of additional rate tax band 

With the new tax year comes some changes to the 45% additional tax rate threshold. The threshold is being lowered from £150,000 to £125,140. This means that more higher earners will pay more tax. 

3. Statutory Sick Pay increase 

From 6th April 2023 the Statutory Sick Pay rate will increase to £109.40 per week. This is an increase of 10.1% from 2022/23.  

4. Parental payments increase 

From 2nd April 2023, there will be an increase to Statutory Maternity Pay, Statutory Paternity Pay, Statutory Shared Parental Pay and Statutory Parental Bereavement Pay. All payments will rise to £172.48 per week, up from £156.66 per week. 

Full details of 2023/24 benefit changes can be found here

5. Reduction to the dividend allowance 

From 6th April 2023, the tax-free allowance for those who receive dividend incomes will be reduced from £2,000 to £1,000. 

6. Additional bank holiday 

Due to the coronation of King Charles III, 2023 will have an extra bank holiday which will take place on Monday, 8th of May. 

7. Review of state pension age 

In early 2023, there is expected to be a review of the state pension age which is currently set at 66. People are now living longer and will spend a larger proportion of their lives receiving the state pension. It is because of this that the state pension age is reviewed regularly. 

Current legislation states that there will be a gradual increase in state pension age to 67 for those born on or after April 5, 1960. There will then be a gradual rise to 68 for those born on or after April 5, 1977. This rise isn’t set to happen until between 2044 and 2046. However, the review will consider whether the rise should be brought forward to between 2037 and 2039. 

8. Lowering the auto enrolment earnings threshold 

There are many people in ‘underpensioned’ groups who earn below the auto enrolment threshold of £10,000 a year. This means they will have to rely on the state pension for the majority of their income after retirement. Underpensioned groups are largely made up of people with disabilities, single mothers, carers and ethnic minorities.  

Workplace pensions provider, Now Pensions, have been campaigning on behalf of underpensioned groups. In December 2022, Now Pensions, in collaboration with the Pensions Policy Institute, published a report which proposes the removal of the £10,000 auto enrolment earnings trigger. The removal of the trigger would mean 3 million employees from underpensioned groups would be enrolled into workplace pension schemes, reducing the pensions gap. 

9. UK GDPR to be replaced 

On 18th July 2022, the Data Protection and Digital Information Bill was introduced to Parliament. It was a significant milestone in data protection reform since Brexit. The legislation proposes amendments to existing laws such as the UK's General Data Protection Regulation (UK GDPR). The second reading of the bill has been put on hold, with a date yet to be announced, so it’s definitely one to look out for in 2023. 

10. Technological Advancements   

We’ve seen huge advancements in technology over the past few years, and this trend is likely to continue into 2023 and beyond. We could see more automated processes within payroll departments, including AI-based systems that can help streamline processes. As well as this, blockchain technology could be used to securely store employee data and make payments. While this technology is likely a while off yet, it’s one to keep an eye on! 

Have your say 

In December 2022, Chancellor Jeremy Hunt announced that the Spring Budget will take place on 15th March, 2023 with a number of measures expected to tackle the cost-of-living crisis. A representations portal is now open for stakeholders, such as interest groups, individuals and representative bodies, who would like to submit a written representation to HM Treasury commenting on government policy or any policies they think should be considered as part of the Spring Budget. Find out how to submit your representation here. The representations portal closes on 1st February 2023. 


 Image of author, Elaine Carroll

Written by Elaine Carroll | Bright

BrightPay by Bright





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