HOT TOPIC
W e had just wrapped our collective heads around the changes for the upcoming tax year, come to terms with the health and social care levy and braced for a drastically worsening cost-of-living crisis. Then, we were thrown into turmoil as Rishi Sunak, Chancellor of the Exchequer, announced a raft of changes to the UK tax system, in the spring statement of 2022. Ahead of the speech, delivered on 23 March 2022, speculation began to swirl amid the cost-of-living crisis and February’s consumer price index (CPI) increase to 6.2%. Media sources were reporting a rumoured increase in National Insurance (NI) thresholds, and others called for the scrapping of the health and social care levy. There were, however, some changes we didn’t expect. NI thresholds The statement announced an increase in both the primary threshold (PT) and lower profits limit, from £9,880 to £12,570, from July 2022. This will align the rates with the income tax personal allowance. This means that, from 6 April 2022 to 5 July 2022, the PT will be set at £190 per week (£823 per month), but from 6 July 2022, this will rise to £242 per week (£1,048 per month). The government has stated that, from July, around 70% of workers will pay less NI than they did in 2021/22, even after factoring in the new health and social care levy. The increase in threshold will also mean that 2.2 million individuals will no longer pay class 1 employee NI, class 4 self-employed NI or the health and social care levy. The government has also confirmed that ‘entitlement to contributory benefits are
unaffected by this measure’. Because there are no changes to the lower earnings limit (LEL), state pension, statutory payments and benefits won’t see any eligibility changes mid-year. The decision not to make this change from April caused some discussion and controversy. The spring statement documentation states: ‘July is the earliest date that will allow all payroll software developers and employers to update their systems and implement changes’. While there may be some truth to this, many software developers have spoken out, saying this change could be implemented on a quicker timescale. Others have pointed out that it’s more likely this was a government timing issue. Changes such as this require Parliamentary discussion and must be written into law. With only two weeks until the start of the tax year when the statement was made, it seems unlikely this could have been managed in time. Even so, a three month wait for those suffering through a cost-of- living crisis seems to be a lengthy period. While the CIPP advocates for sufficient time to allow payroll software developers to fully develop, test and roll out amendments, it seems the timing must be dictated by the complexity of those changes. Getting payroll processes correct is of the highest priority, however, with many modern payroll systems, a change to NI rates would be a relatively quick and simple change. While we don’t want a repeat of the short turn around time of the coronavirus job retention scheme (CJRS), this timescale could have been reduced, as it could have a significant impact on individuals who are currently unfortunately feeling the pinch. The new PT for 2022/23 is as follows:
Spring statement shocks
Mathew Akrigg ACIPP, policy and research officer at the CIPP, discusses the spring statement announcements that payroll professionals need to know all about
PT to 5 July 2022
PT from 6 July 2022
Weekly
£190
£242
2-Weekly
£380
£484
4-Weekly
£760
£967
Monthly
£823
£1,048
Quarterly
£2,470
£3,143
Half-Yearly
£4,940
£6,285
Annual
£9,880
£12,570
Directors Annual
£11,908
The annual threshold for directors is comprised of 13 weeks at £190 and 39 weeks at £242 for 2022/23.
| Professional in Payroll, Pensions and Reward | May 2022 | Issue 80 46
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