What are the main considerations businesses prepare for in the new tax year in the UK?
This week, Andy and Alice discover the end of the tax year and what this means for businesses and more specifically, payroll teams.
Looking to stay informed? Below are some highlights on what businesses need to consider:
National Living Wage and National Minimum Wage
The National Living and Minimum Wage rates have seen another large increase for the coming tax year. While inflation rates have fallen they still remain high and the government has again accepted the proposals from the Low Pay Commission.
Perhaps the biggest change however is that from the 2024/25 tax year the National Living Wage will apply to those aged 21 and over when currently it is those aged 23 and over. With the biggest increases being seen for younger workers we are beginning to see a move towards parity of the wage rates.
Income tax
The situation for income tax remains unchanged for most of the UK, with the England and Northern Ireland rates and tax thresholds remaining unchanged and Wales again deciding to keep their rates aligned.
Changes are coming for Scottish residents however, with a new Advanced tax rate being introduced at 45%, falling between the existing Higher and Top rates, the latter of which has also been increased by 1% to 48%.
The personal allowance applies to the whole of the UK and remains frozen at £12,570. This and the majority of the tax thresholds being frozen will continue to mean fiscal drag will increase the tax people pay after an extended period of high wage growth due to inflation.
National Insurance
A further 2% reduction in the main employee rate of National Insurance will take effect from 6th April 2024. After reduction from 6th January this brings the employee rate to 8%. All the thresholds remain frozen. There will also be four new NI categories relating to Investment Zones. These are N, E, K and D. Investment Zones are functionally equivalent to Freeports for National Insurance purposes.
Statutory payments
As with minimum wage, rates of inflation mean another year of large increases to statutory payments. The standard rate for parental payments (SMP, SPP, SAP, etc.) has increased to £184.03 from 7th April 2024 and SSP has increased to £116.75 per week from 6th April 2024.
As well as increases to the rates of pay, April 2024 also brings changes to Statutory Paternity Pay and Leave. The period of time available to take paternity leave will increase from the current 8 weeks to 52 weeks from the date of birth or placement. The second week of leave can also be taken separately rather than in a single block of two weeks as per the current rules. These changes apply to expected birth dates from 7th April and for expected placement dates from 6th April in the case of adoptions.
Holiday pay and entitlement
The holiday pay saga continues in 2024 with new legislation taking effect from 1st January 2024. We will see the return of rolled-up holiday pay and the 12.07% accrual rate which had previously been deemed illegal in such high-profile cases as Harpur Trust v Brazel.
The legislation retains the split of 4 weeks at normal rate of pay and 1.6 weeks at basic rate of pay but does at least attempt to define what constitutes “normal” pay.
For many workers the new legislation will make no difference to the way holiday pay is calculated and the current rules and complexities of average holiday pay remain. But for some, new options are available leave years beginning on or after 1st April 2024:
rolled-up holiday pay
holiday entitlement based on an accrual rate of 12.07% of hours worked
Both these measures will apply to irregular hours and part-year workers only, both of which are defined in the legislation.
Flexible working requests
The Flexible Working Regulations will formally make requesting flexible working arrangements a day one employment right from 6th April 2024. This is currently a right only available to those in a job for 6 months or more.
Protection from redundancy
From 6th April 2024 the protections from redundancy afforded to those on maternity, adoption or shared parental leave will be extended. The rights will now apply to pregnant employees from the point they inform their employer and will extend up to 18 months after childbirth.
Carer's Leave
Also from 6th April 2024, the Carer’s Leave Act makes provisions for up to a week of unpaid leave for employees with caring responsibilities for a dependent with a long-term care need (e.g., elderly or disabled).
This will be:
A day one right.
Taken in increments of half or full days, up to a week, over a 12-month period.
Require no evidence.
Have the employment protections as for other types of family related leave.
Intended for planned and foreseen commitments as opposed to the emergency situations that Dependents Leave would apply to.
Not intended for childcare situations except where the child meets the definitions of a dependent with a long-term care need.
To learn more, check out our Tax Year End checklist.