COMPLIANCE
Spring into the new tax year
There’s no better time to think about leaping into the new tax year than in the season of spring. Samantha O’Sullivan ChMCIPPdip, CIPP policy and advisory lead, gives an update on the changes to be aware of for the 2024/25 tax year and beyond*
S pring is a wonderful time of year for everyone to enjoy – it’s when the fields are filled with leaping lambs and gardens and woodland are carpeted in daffodils and bluebells. Not to mention that there’s also a spring budget scheduled for 6 March 2024, which could bring about more changes that haven’t been covered in this article due to publication deadlines. We also have tax year end, but there’s no need to worry when you hear those three little words – tax year end isn’t as daunting as you initially think. A few key things which must be addressed for the 2023/24 tax year end relate to the mid-tax year change to the main rate of National Insurance (NI) from 12% to 10% from 6 January 2024, and involve directors, as follows: l any directors whose National Insurance contributions (NICs) were paid using the alternative method throughout the tax year must be changed to the cumulative method for the final pay period in the tax year. This is particularly important as the mid-tax year change to the main rate of NI means a blended rate for directors’ NICs, of 11.5% for National Insurance (NI) categories A, F, H, M and V, and 5.35% for categories B and I l for directors who have left within the tax year, a recalculation of their primary class 1 NICs will be required due to the above NICs change. Once tax year end is finalised and the dust settled, there’s no time to enjoy the outdoor wonders of spring; us payroll professionals have the new tax year to get working on! New tax year In operational payroll, I loved a checklist. I got more satisfaction than I should have by ticking a box to show a task had been done. Creating a checklist for something as important as the new tax year process
means that once it’s collated, you can use it year in, year out. Now who doesn’t love recycling a process?! It may be that your chosen software provider provides a checklist or a workflow process for you to work through, but if not, create one this year and once it’s done, you can reuse it every year. To get you started, let’s look at the key things we need to ensure are captured: Check software has been updated and you’re working on the most recent release If you use cloud-based software, it may automatically update for you. If your software is server / desktop based, you’ll more than likely need to update the version you’re using. If you use the pay as you earn (PAYE) basic tools, please ensure you’re working on the most recent release; you can see the release number in the bottom left corner of the tool. Don’t forget, the responsibility for changes being implemented correctly within the payroll software ultimately lies with the payroll professionals using that software, so it’s crucial relevant testing and reviews are applied to any changes ahead of implementation. A list of tests to be conducted can be taken from the changes below. Ensure tax rates and thresholds are correct If we start with what’s remaining the same, the personal allowance is frozen (until 2027/28) at £12,570 per year, meaning the standard tax code stays at 1257L. The bandings and rates remain the same for England, Wales and Northern Ireland. Moving onto things that have changed, Scotland, which uses its devolved status to draw a distinction between the rates and thresholds of income tax, has introduced a new band, which was announced during the Scottish budget late last year. 2024/25
will see the introduction of the advanced rate, which will apply to those earning from £62,431 up to £125,140 per year, payable at a rate of 45%. Additionally, the basic and intermediate bands will be increased by inflationary figures to apply from £2,307 and £13,992 respectively. The starting point of the higher and top bands will remain the same. Please see the table to the right. Tax code updates HM Revenue and Customers (HMRC) will send P9 updates to update existing employees’ tax codes. Please ensure these are applied before the first pay period of the new tax year. Ensure NI rates, thresholds and categories are correct There are new NI categories for investment zones coming into play for 2024/25, which mirror the existing NIC category letters A, B, C and J, respectively. Statutory payments The autumn statement 2023 announced the new statutory payment figures to be used from April 2024. The new rate of statutory sick pay (SSP) will be £116.75 per week, payable from 6 April 2024 in line with the new tax year. For family-related statutory leave, which covers maternity, paternity, adoption, shared parental and parental bereavement, the new rate of £184.03 per week is applicable from Sunday 7 April 2024, or 90% of the employee’s average weekly earnings (AWE), whichever is lower. Don’t forget that for maternity and adoption cases, the new parents will receive 90% of their AWE for the first six weeks. Student loans At the time of writing, we didn’t have confirmation of the postgraduate threshold.
| Professional in Payroll, Pensions and Reward | March 2024 | Issue 98 26
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