It’s January and while the rest of the team are hard at work finishing up the 2022/23 tax returns, the payroll team are looking ahead to the new tax year that starts in April 2024.

Following the Autumn Statement, we’ve already had one change that came into force from 6 January – the decrease in the employees national insurance rate from 12% to 10%. This means that for someone earning £25k per year, it will add an extra £250 per year to their take-home pay.

But what else have we got in store from April 2024:

• National living wage goes up to £11.44 per hour for those aged 21 and over.
• Statutory sick pay goes up to £116.75 per week.
• Statutory maternity, adoption and paternity pay goes up to £184.03 per week.
• There will be more flexibility for those claiming paid paternity leave whereby the leave can be taken in a one- or two-week block within a 52-week window from the date of birth, or date of placement in the case of an adoption.
• Working parents of two-year-olds will be able to access 15 hours of free childcare. And from September 2024, this offer will be extended to those with children aged nine months or older.
• Holiday entitlement for those that work irregular hours or those that only work part of the year is set to change. For holiday years starting on or after April 2024, there will be two methods – either:
  • Rolled-up holiday pay can be used. This is where workers are paid holiday pay whilst they are working instead of when they take leave. In such situations, holiday pay is calculated each time the worker is paid at a rate of 12.07% of their total earnings. It is then added to the same payslip but shown as a separate item.
  • Alternatively, such workers would accrue annual leave based on 12.07% of the hours worked. Holiday pay would then be added to their payslip when they take leave at a rate of pay equal to their average earnings over the previous 52 weeks.

As the tax bands and national insurance thresholds have been frozen for 2024/25, the tax-efficient tax directors’ salary will remain at £12,570 for the coming year. For those company PAYE schemes with just a single director and no other employees on the payroll, there will be £479 of employers national insurance to pay on such a salary in early 2025. But, even with that charge, the overall tax saving of paying yourself a salary at this level instead of a dividend is £1,850 per year.

However, if you chose to reduce your directors’ salary but still want to make sure that you obtain a qualifying year for state pension purposes, your annual salary would need to be at least £6,396 for 2024/25.

This is how things currently stand for the coming tax year but I should point out that we are expecting a general election at some point this year so things could change. But that’ll be a story for another day.

If you’d like further information regarding our payroll services, please get in touch.