Sep 2022
28
Mini budget reveals big changes for payroll
On the 18th of October 2022, there was an announced reversal of some of the measures previously outlined in September's mini-budget.
The new chancellor, Jeremy Hunt, has made changes to the mini-budget, ahead of the medium-term fiscal plan at the end of October. Hunt will be reversing almost all of the tax cuts, that the previous chancellor, Kwasi Kwarteng, announced in September. Hunt stated that stability is the objective and that this new approach will cost taxpayers much less than originally planned.
Whether you’re an accountant, payroll bureau, business owner or payroll professional, you’re probably wondering what effect this will have on how you run payroll.
Below, we’ve listed the changes which will most affect payroll processors and what steps, if any, you need to take to implement these changes.
1. Income tax stays the same
The reduction of the basic rate of income tax by 1% will be scrapped ‘indefinitely’, and so will remain at 20%.
What do I need to do?
No action from payroll processors is required.
2. Health & Social Care Levy scrapped
- The planned abolishment of the Health and Social Care Levy will go ahead as planned. From 6th November 2022, the temporary increase to National Insurance (NI) contributions will end and the rates which were applicable in the 2021/22 tax year will apply once again.
- The 1.25% Health and Social Care Levy will no longer come into force next year.
- Those who pay National Insurance on an annual basis will pay a blended rate of NI for the 2022/23 tax year to take into accountant the changes in NI rates throughout the year.
The blended rates are as follows:
| National Insurance Class | Main rate | Additional rate |
| Directors | 12.73% | 2.73% |
| Class 1A and 1B | 14.53% | N/A |
| Class 4 | 9.73% | 2.73% |
What do I need to do?
The new rates will mean that payroll software providers will need to update their software from November 6th to account for these changes.
3. IR35 rules to remain the same
It was previously announced that rules regarding off-payroll working would return to what they were pre-2017, however this is now no longer the case. The reform, which would have cost £2bn a year, has now been cancelled and IR35 rules will remain the same.
What do I need to do?
No action from payroll processors is required.
4. Retained EU Law (Revocation and Reform) Bill
The Retained EU Law (Revocation and Reform) Bill is a new bill which will end all EU retained laws by 31st December 2023 to make way for new regulations, tailor-made for the UK.
What do I need to do?
This bill could potentially have massive implications for UK employment law, so it is one to watch in the coming year.
Further changes to the mini-budget
Hunt introduced other changes to the mini-budget, which included:
- The universal help on energy prices will only apply for six months, until April 2023 (instead of the two years that it was originally intended for)
- There will be no rise in corporation tax
- The basic rate of income tax will remain at 20%
- No cuts on dividend tax rates
- New VAT-free shopping for overseas visitors will no longer be going ahead
- There will be no freeze on alcohol duty rates
Related articles:
- 3 signs your payroll process is outdated
- 6 features your payroll software should have
- Organised labour fraud: Warning to employers from HMRC
