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Spring budget 2023 update
A s payroll professionals, we often await fiscal statements with bated breath, and the spring budget of 2023 was certainly no different. These events can often bring a raft of changes for the industry to be aware of, and often directly impact the work payroll carries out on a daily basis. There is some good news here, however, as the spring budget, although full of interesting announcements, did not announce a substantial amount that will have significant effects for payroll. Let’s not forget, the autumn statement was only delivered on 17 November 2022, so there hasn’t been very long between the two fiscal events. We’d already heard about changes to the additional tax rate threshold, and multiple freezes to tax and National Insurance until 2028, so it was to be expected that no new announcements were made in that space. There was, however, some news in areas which sit on payroll’s periphery, as the profession becomes more involved with other organisational departments, and is now often consulted in a strategic capacity. Let’s turn our attention to some of those areas now… “The spring budget, although full of interesting announcements, did not announce a substantial amount that will have significant effects for payroll”
Investment zones Initially mentioned in the growth plan, investment zones are intended to drive growth and unlock housing across the UK. The budget confirmed 12 new investment zones will be created, including four across Scotland, Wales and Northern Ireland. There will be benefits for employers in designated areas in investment zones, including a zero-rate of employer National Insurance contributions (NICs) on new employee earnings up to £25,000 per year, in alignment with the employer NICs relief for businesses located in freeport tax sites. This will be for employees working in the investment zone for at least 60% of their time, and the relief can be applied for up to 36 months per employee. This is a change to the information provided alongside the growth plan, in which it was indicated a zero-rate of employer NICs would apply on new employee earnings up to £50,270 per year, in alignment with the upper earnings limit. It’s important for payroll professionals to be aware of this change to ensure they process payroll in a compliant manner. Pensions As always, prior to the budget speech, there was much speculation as to its contents. Much of this focussed on potential reform to the taxation of pensions. The budget didn’t disappoint in this area… The first announcement centred on the annual allowance, and it was confirmed this would increase from £40,000 to £60,000 from 6 April 2023. It will still be possible for individuals to carry forward any annual allowance that’s unused from the previous three tax years. The annual allowance is the maximum amount of pensions savings an individual can make each year with tax relief without incurring a tax charge.
The second big announcement related to the pension lifetime allowance. It currently sits at £1,073,100. It was rumoured this would be uplifted to £1,800,000, but Hunt really surprised everyone by announcing the pensions lifetime allowance would actually be abolished. The lifetime allowance charge will be removed from 6 April 2023, and the lifetime allowance will be abolished in full in a future Finance Bill. “Hunt really surprised everyone by announcing the pensions lifetime allowance would actually be abolished” Hunt recognised in his speech that “3.5 million of pre-retirement age over 50s are not part of the labour force, an increase of 320,000 since before the pandemic”. These amendments to the pensions tax system could encourage individuals in this age bracket to return to work, as they can potentially save more into their pension pots without incurring tax charges. ‘Returnerships’ Another measure to incentivise the over- 50s population to get back into work, are the wonderfully named ‘returnerships’. This will be a new kind of apprenticeship, targeted at over-50s who wish to return to work. They will operate alongside skills boot camps and sector-based work academies, and will focus on flexibility and previous experience, to reduce the length of training.
| Professional in Payroll, Pensions and Reward | April 2023 | Issue 89 54
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