Spring Statement - last minute payroll changes for 6 April and 6 July
Forget the removal of VAT from green home improvements, forget the reduction in fuel duty (that will counteract that)…………
Today was the day that Rishi Sunak took on the hardest audience of his life……..payroll software product managers.
Product managers in payroll software companies are traditionally full of doom and gloom on the mornings of the Budget and Spring Statement; predicting that something major is going to change with insufficient warning.
Well this afternoon they are saying “I told you so” [forget that this is the first time they’ve been right in years - whisper it quietly, but they are pessimists not soothsayers].
So what has changed?
The one that will have the least impact (unless you are a Product Manager) is the change to Employment Allowance.
From 6 April - yes 14 whole days notice - is going to change from £4,000 per annum to £5,000 p.a.
Definitely of some value to small employers - who are the backbone of UK employment - but is it going to offset rising energy costs? Possibly not.
Changing National Insurance Thresholds
The well signposted news on National Insurance was that the Health Care Fund changes were not being scrapped and that they were necessary to fund care and the NHS.
The big surprise - and judging from the immediate silence on the Labour benches a very big surprise - was the change to National Insurance Thresholds.
Instead of the £300 increase to the Primary Threshold (PT), Rishi decided to scrap National Insurance Contributions for a lot of low paid workers, part-timers and - ironically - single director only companies by increasing the PT xto the same level as the tax threshold - i.e. £12,570 p.a.
A £3,000 per annum threshold increase.
Fortunately he understood the danger of doing this for 6 April - which would have caused a payroll software riot - and he delayed this until 6 July 2022.
This has the advantages of providing time for the change but also being the beginning of a tax month and a tax week. Tidy.
Obviously, this does mean a reduction in the “tax” receipts which may or may not have been available to care/national health spending - but people will analyse when everyone has got over the surprise.
N.B. this is in addition to the NI changes for Freeports and Veteran's NI which required all other NI categories to have a small change to their calculation method. Read our earlier article on those changes here.
What does this mean?
For payroll bureaus/accountants/bookkeepers then this probably means very little - the changes will be in payroll softwares and will be picked up automatically.
More grey hairs/increased hairlessness if you’re a product manager over the next few days and months. Especially as there will be a specific Primary Threshold for directors to implement (see below for why).
But it could mean that accountants are now going to revisit the levels of pay that the director only clients pay themselves.
If tax and NI thresholds are the same, is there any benefit in not taking a salary of £12,570?
Well maybe - but as directors NI is calculated using the annual method, the £12,570 this year is pro-rated to take account of the fact that the change is effective from 6 July 2022.
It will be interesting to see whether directors switch to the full £12,570 or for this year use the pro-rated amount of £11,908 and then switch to the full amount next year.
But there could be some frantic changes in time for April to the £11,908 figure.
Other things to think about
Aside from the above - if you have clients who wanted to switch from P11Ds to Payrolling of Benefits then remember they need to register that intent with HMRC before 6 April 2022 or they lose the opportunity for another year.
KeyPay is a cloud payroll system designed for accountants, bookkeepers and bureaus. KeyPay will have the above changes in places for the required dates and users won’t need to make any updates (it’s fully cloud with no downloads required ever).
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