Changes to PAYE Legislation from April 2022

Tue, Apr 26, 2022


You won’t be alone if you’ve started to receive emails detailing the increases to your monthly bills. In fact, you can’t even look at the news without seeing more updates affecting the cost of living.

This breakdown should help you understand the changes to statutory payments, such as maternity (SMP), personal allowance, National Insurance, tax, and the National Living Wage.

What will the National Living Wage be in 2022?

Last year changes to the National Living Wage saw workers aged 23 and 24 included in the guidelines, benefitting millions of additional young workers.

This year sees an increase of £0.59 to the National Living Wage hourly rate, which equates to an extra £1,000 a year for the average full-time employee.

Here’s a breakdown of this year’s rates compared to last year:

What is the Real Living Wage?

Here at Portt & Co, we are accredited Living Wage employers. This means we pay our employees the ‘Real Living Wage’; a voluntary rate calculated by the Living Wage Foundation as a more realistic wage to meet the rising costs of living.

The new Real Living Wage rates were announced on 15th November 2021 and accredited employers have six months to implement the rise to £9.90 per hour (£11.05 per hour in London).

What is the personal allowance for 2022/23?

Personal allowance is the amount of income that you do not pay tax on. The amount of tax you pay in each tax year depends on how much of your income is above your personal allowance and how much of your income falls within each tax band.

The personal allowance tax threshold for 2022/23 is £12,570, the same as last year.  HMRC states that the average full-time salary at the beginning of 2022 was £24,600, meaning £12,030 of their income was the taxable.

The standard tax code remains as 1257L, which is expected to continue until 2026.

Employees who are married or in a civil partnership may benefit from claiming Marriage Allowance if one partner is not earning up to their personal allowance. Up to £1,250 of their remaining allowance can be transferred to the other partner through an adjustment to the tax code, which could result in an additional £20 to £30 per month.

Employees can check their eligibility and claim for Marriage Allowance online using this link.

Tax relief for working from home

Changes have been made to the tax relief for employees working from home, which equated to £6 per week.

From 6th April 2022, you can claim tax relief for working at home if:

Your employer has not already paid your expenses and you have additional household costs as a result from working at home.

However, one of the following must also apply for you to qualify:

  • There are no appropriate facilities available for you to perform your job on your employer’s premises.
  • The nature of your job requires you to live so far from the employer’s premises that is is unreasonable for you to travel to those premises on a daily basis.
  • You are required, under Government restrictions, to work from home.

According to the Government website, you cannot claim tax relief if you have chosen to work from home.

You can check your eligibility online using this link.

The Health & Social Care Levy – what do I need to know?

The Heath & Social Care Levy comes into force on 6th April 2022. But what is it and how does it affect you?

The levy has been brought in to increase funds to the NHS and health and social care provisions. While the levy officially starts on 6th April 2023, this year will see a temporary increase to National Insurance contributions.

The increase will affect anyone who pays Class 1, Class 1A, Class 1B and Class 4 National Insurance. This will be both employee and employer contributions that are paid through payroll, expenses and benefits.

The temporary increase of 1.25% will see employee contributions rise from 12% to 13.25%.

Those with National Insurance Contributions at 2% (earnings above the UEL of £50,270 per year) will increase to 3.25%.

Employer contributions will increase from 13.8% to 15.05%.

When the levy officially begins in April 2023, National Insurance rates will return to their previous rate and the levy will be collected separately.

What is the National Insurance (NI) threshold for 2022/23?

Despite an increase to National Insurance contributions, many workers should be slightly better off following the Spring Budget announcement.

In July, the lower earnings limit will rise by £3,000, bringing it in line with the income tax threshold. This increase should equate to 70% of people paying on average £330 less National Insurance than they did last year.

Here’s an overview of the thresholds for this year, including July’s uplift, compared to 2021/22:

Directors receiving a salary through payroll will need to consider whether they pay themselves at the Primary Threshold, the Secondary Threshold or whether they want to use their full personal tax allowance. Your accountant will be best placed to advise on this, depending on your individual circumstances.

How much is SMP in 2022?

Statutory pay changes come into effect from Sunday 3rd April 2022. As an employer, it is important to ensure you are familiar with the changes and how this may affect your staff.

This means that as of the first Sunday in April, the weekly rate for Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), Statutory Adoption Pay (SAP), Statutory Shared Parental Pay (SSPP) and Statutory Parental Bereavement Pay (SPBP) will increase to £156.66 (or 90% of the employee’s average weekly earnings, whichever is lower).

The 2022/23 rate of £156.66 is an increase of £4.69 from 2021’s £151.97 a week, which is significantly higher than last year’s increase of £0.77.

How much is SSP in 2022?

Statutory Sick Pay (SSP) is increasing to £99.35 a week and can be claimed for up to 28 weeks.

On 24th March, the SSP rules for self-isolation were changed. Staff are no longer entitled to SSP for self-isolation unless they are unwell and off sick.

Who needs to be aware of these changes?

As an employer, you should make yourself aware with any changes that can affect your staff. Whoever is responsible for your payroll should have expertise in all of these areas and be fully up-to-date with any upcoming changes.

We offer an expert and well-established payroll service , which provides clients with peace of mind, meaning that your most valuable assets are paid accurately and on time.