Understanding tax codes, National Insurance contributions, and statutory payments is a crucial element in your role as an employer. It’s also vital to know the updated thresholds and rates set by HMRC to ensure accurate payroll management and tax compliance. To help, we’ve collated seven of the essential rates and thresholds for the 2023-2024 financial year.
1. Income Tax
The personal allowance, the amount of income you don’t have to pay tax on, remains a key figure.
- Personal Allowance: £12,570
- Basic rate (20%): For incomes over the personal allowance up to £37,700
- Higher rate (40%): For incomes over £37,771 up to £125,140
- Additional rate (45%): For incomes over £125,140
2. National Insurance Contributions (NICs)
You can only make National Insurance deductions on earnings above the lower earnings limit.
NICs thresholds:
- Lower Earnings Limit: £123 per week.
- Primary Threshold: £242 per week.
- Secondary Threshold (ST): £175 per week.
- Upper Earnings Limit (UEL): £967 per week.
Find the employee contribution rates here
Employer NIC
You pay secondary contributions (employer’s National Insurance) to HMRC as part of your PAYE bill.
- Class 1: For employees earning above the Secondary Threshold, the rate remains at 13.8%.
3. Statutory Payments
Statutory Sick Pay (SSP):
The same SSP rate applies to all employees. However, the amount you pay depends on the number of ‘qualifying days’ they work each week. Calculate your employee’s statutory sick pay here.
Statutory Maternity Pay (SMP), Paternity, Adoption, and Shared Parental Pay:
- First 6 weeks: 90% of the employee’s average weekly earnings.
- Remaining weeks: £172.48 or 90% of the employee’s average weekly earnings, whichever is lower.
4. Student Loan Deductions
If your employees’ earnings are above the earnings threshold, you must record their student loan and postgraduate loan deductions in your payroll software. It will automatically calculate and deduct repayments from their pay. There are several plans for student loan repayments:
- Student loan plan threshold 1: £22,015 annually, threshold 2: £27,295 annually or threshold 4: £27,660 annually. Deduction rate: 9% on earnings above the threshold.
- Postgraduate loan plan threshold: £21,000 annually. Deduction rate: 6% on earnings above the threshold.
5. Pension Contributions
Automatic enrolment obliges employers to enrol all workers into a qualifying workplace pension, provided that they ordinarily work in Great Britain and satisfy the age and earnings criteria.
Auto-enrolment thresholds:
- Qualifying earnings band:
- Lower level: £6,240 annually.
- Upper level: £50,270 annually.
Minimum contribution rates:
- Total minimum: 8% of qualifying earnings.
- Employer’s minimum contribution: 3%.
- Employee’s contribution: 5%.
6. Apprenticeship Levy
Employers with an annual pay bill of over £3 million are liable to pay.
- Rate: 0.5% of the total pay bill.
- Allowance: £15,000 annual allowance to offset against the levy payment.
7. Minimum Wage
The National Minimum Wage is the minimum pay per hour almost all workers are entitled to by law.
From 1 April 2023, the minimum wages are:
- Aged 23 and above (national living wage rate: £10.42
- Aged 21 to 22: £10.18
- Aged 18 to 20: £7.49
- Aged under 18 (but above compulsory school leaving age) £5.28
- Apprentices aged 19 and over but in the first year of their apprenticeship: £5.28
How Can I Find Out More?
The government website should have the most up-to-date rates and thresholds.
Find out detailed information on all the above and more here.
Understanding the details needn’t be daunting. If you ever feel lost, remember: Your business is our business, and we’re always here to lend a friendly ear and a helping hand.
*All figures are correct at October 2023 and subject to change
