Payroll processes and mini-Budget reversal

26 October 2022

On Monday 17 October Jeremy Hunt made major amendments (or reversals) to the mini-Budget of 23 September. National Insurance (NI) and PAYE changes that will be applied or reversed are:

NI/Social Care Levy

1. Removal of the 1.25% Health and Social Care Levy that was implemented from 6 April 2022:

  • employee NI rate will reduce from 13.25% to 12%;
  • employee NI, above Upper Earnings Limit (UEL), will reduce from 3.25% to 2%; and
  • employer NI will reduce from 15.05% to 13.8%.

2. Removal of payslip message indicating 1.25% increase in NI for Social Care Levy.

3. Directors' annual earnings for NICs will be calculated at a blended rate:

Primary threshold to UEL (£11,908 – £50,270)    12.73%
Primary above UEL (£50,270+)      2.73%
Secondary (£9,100+)    14.53% 
 

4. Class IA on P11ds 2022/23 will be calculated on a blended rate of 14.53%. 

5. Class 1B (on PAYE settlement arrangements) for 2022/23 will be 14.53%.

6. Salary Sacrifice Pension – if you are applying cash values through the payroll, these will require recalculating, removing the 1.25% Social Care Levy. If RSM processes your payroll we will be in contact if you operate pension using this method.

7. Smart Type Salary Sacrifice Pension Schemes – if you operate one of these schemes you, your provider or IFA will need to recalculate pension deductions (NI Savings based on the amended rates above) and apply to your payroll from 6 November. Employees should also be made aware of the contractual change to their pension contributions. If RSM operates your payroll the new deductions should be passed to RSM for the November payroll process.

PAYE

8. PAYE Basic Rate reduction from 20% to 19%  effective from 6 April 2023 has been reversed.

9. Removal of the Higher Rate tax rate 45p, effective from April 2023, has been reversed.

Our client payroll software has been updated and calculations tested in accordance with HMRC software guidelines.

If you have any questions or concerns about these changes, please contact Simon Balaam or Steve Sweetlove.