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How the Spring Budget affects payroll

17th Mar 2023
Brought to you by
BrightPay logo

The payroll solution that provides all you need for Auto Enrolment.

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Have you found this content useful? Use the button above to save it to your profile.

After a turbulent period where the economy has been facing inflationary pressures, labour shortages, and the need for business investment, a new budget is finally here. Jeremy Hunt has unveiled a Spring Budget focused on expanding childcare, implementing tax cuts for businesses, easing cost-of-living burdens, and initiating reforms to support people into work. 

With the government's approach to the next fiscal year finally revealed, we look at what payroll providers need to know, and how online payroll software can help you stay ahead.

  1. New Business Tax Cuts

The budget introduces a £27 billion tax cut for businesses through radical 'full expensing' policy and capital allowances reform, aimed at driving investment and growth. This policy will be in place for the next three years, potentially becoming permanent.

The tax cuts are aimed at allowing companies to invest more in equipment, machinery, and infrastructure, ultimately leading to growth and increased productivity. Businesses will need to adjust payroll systems to account for changes in tax liabilities and potential increases in staffing levels due to expansion.

  1. Childcare Revolution

The Spring Budget introduces 30 hours of free childcare for every child over the age of 9 months, with phased support for all eligible working parents of under-5s by September 2025. Parents on Universal Credit will receive upfront support for childcare costs, with maximum claims boosted by around 50%.

In theory, the expanded child care support will enable more parents, particularly women, to re-enter the workforce, resulting in a larger, more diverse talent pool. Businesses may need to adjust payroll and benefit systems to accommodate employees taking advantage of these childcare subsidies.

  1. Employment and Pension Reforms

A major set of reforms aims to support people into work, including removing barriers for those on benefits, older workers, and those with health conditions. These changes will impact millions of workers who may need to adjust their retirement plans, while employers will have to adapt to prolonged pension contribution periods for their employees.

The pension reforms include an increase in the Annual Allowance from £40,000 to £60,000, designed to incentivise highly skilled workers to stay in the labour market. Meanwhile, the Lifetime Allowance charge will be removed before being abolished altogether, eliminating barriers to remaining in work and simplifying the tax system for longer term workers.

For millions of workers, these changes may necessitate revising their retirement plans as they are encouraged to work for longer, while businesses must plan for extended periods of pension contributions for their employees. Organisations will need to reassess their pension schemes and financial planning to accommodate the prolonged working lives of their staff.

Analysis: Adapting your payroll process for 2023

While the budget aims to support businesses by providing more support for workers, there will be major impacts for businesses themselves, especially when it comes to tax. Rishi Sunak’s announcement from the 2021 Spring Budget, would see the tax rate climb from 19pc to 25pc, hitting businesses with profits of more than £250,000, while those with profits of between £50,000 and £250,000 get marginal relief.

For businesses turning an eye to their costs, payroll providers have the chance to fully support your customers with the additional advice, support and technology. Measures to increase the workforce participation and new pensions regulations have the potential to add to the workload for overstretched internal finance and people teams as they attempt to balance overheads and payroll compliance.

During this volatile period, digital payroll tools can have a substantial impact on visibility, cost, and efficiency for your clients. BrightPay and our cloud extension, BrightPay Connect, are designed to help payroll providers work more closely with clients to deliver end to end payroll insight, control and value.

  • Reduce manual payroll processes costs for in-office, contingent and hybrid workers with digital payslips, important company updates, personal details changes and annual leave management delivered instantly via the BrightPay Connect mobile payroll app.
  • Help clients drill down into payroll costs, processes and efficiency with automated reports for Payroll Summary, Employee Details, Annual Leave Summary and HMRC Payments, as well as create customised reports to help them drill down into key cost centres.
  • Reducing risks of compliance failures or lost submissions by automatically backing-up key data to the cloud with no need for in-house servers or manual review.

When it comes to new rates and benchmarks, all relevant threshold and tax data is automatically updated within the BrightPay and BrightPay Connect platforms, so you never need to worry about falling behind on compliance. 

At Bright, we’re excited to announce the release of the cloud version of our payroll software, BrightPay, for the 2023/24 tax year. In our upcoming webinar, we will talk about the differences between BrightPay’s desktop-based software and our online solution. We will discuss the benefits of cloud software, and help you decide if making the move is the right decision for your business.

Register for the webinar

You can find out more about how BrightPay can support you in preparing for the upcoming changes with a free online demo of our software. We also offer 60-day free trials so you can test new automation and compliance functionality before the start of the new regime and get prepared.