NEWS & RESOURCES

Key Employment Payment Rates for 2023

As we continue through 2023, employment rates are set to change and employers need to be aware of the upcoming changes and how they could affect their business. The UK National Minimum Wage is the minimum pay, per hour, that an employer must pay an employee. This article looks at the UK National Minimum wage as well as the key employment statistics, statutory rates, award limits and similar information for 2023 and beyond.

To help you to stay updated, we have created our National Minimum Wage Hub where you can find all of the latest updates in one, easy-to-access place. Stay updated by accessing the National Minimum Wage Hub, here.

Supporting Documents

We understand that these changes can sometimes feel overwhelming. To give you a helping hand, we have created a helpful document that highlights some of the key areas for 2023, where payment rates are going to change.

You can download your copy for free, from our HR Doc Shop, here.

National Minimum Wage (NMW)

2023 – 2024 rates

The National Minimum Wage rates that apply for pay periods on or after 1 April 2023 are as follows:

  • National Living Wage (for adults aged 23 or over): £10.42 per hour
  • adult rate for workers aged 21 to 22 (except where the apprenticeship rate applies): £10.18
  • development rate, for workers aged between 18 and 20 inclusive (except where the apprenticeship rate applies): £7.49
  • young workers rate, for workers aged under 18 but above the compulsory school age and who are not apprentices: £5.28
  • apprenticeship rate, for apprentices under 19 years of age or those aged 19 and over but in the first year of their apprenticeship: £5.28
  • daily rate of the accommodation off-set: £9.10 per day

2022 – 2023 previous rates

The National Minimum Wage rates that apply for pay periods on or after 1 April 2022 are as follows:

  • National Living Wage (for adults aged 23 or over): £9.50 per hour
  • adult rate for workers aged 21 to 22 (except where the apprenticeship rate applies): £9.18
  • development rate, for workers aged between 18 and 20 inclusive (except where the apprenticeship rate applies): £6.83
  • young workers rate, for workers aged under 18 but above the compulsory school age and who are not apprentices: £4.81
  • apprenticeship rate, for apprentices under 19 years of age or those aged 19 and over but in the first year of their apprenticeship: £4.81
  • daily rate of the accommodation off-set: £8.70 per day

2021 – 2022 previous rates

The National Minimum Wage rates that apply for pay periods on or after 1 April 2021 are as follows:

  • National Living Wage (for adults aged 23 or over): £8.91 per hour
  • adult rate for workers aged 21 to 22 (except where the apprenticeship rate applies): £8.36
  • development rate, for workers aged between 18 and 20 inclusive (except where the apprenticeship rate applies): £6.56
  • young workers rate, for workers aged under 18 but above the compulsory school age and who are not apprentices: £4.62
  • apprenticeship rate, for apprentices under 19 years of age or those aged 19 and over but in the first year of their apprenticeship: £4.30
  • daily rate of the accommodation off-set: £8.36 per day

Note:

  • The apprentice rate applies to employed apprentices who are under age 19 or who are aged 19 or above in the first 12 months of their apprenticeship, for all hours spent working and training; other apprentices must be paid the relevant higher rate. Non-employed apprentices continue to be exempt from the NMW.
  • Tips, service charges, gratuities and cover charges, whether discretionary or mandatory, do not count towards the NMW.
  • Future changes to all NMW rates will take place in April each year.

UK Living Wage

This is a voluntary hourly rate, defined as the amount people need “to enjoy a basic, but socially acceptable standard of living”. This is currently £10.90, and £11.95 for those in London. (These rates were applicable from 22 September 2022 and Employers should implement the rise as soon as possible and within 6 months and at the latest 14 May 2023.

Statutory Sick Pay (SSP)

The rate of SSP as from April 2023 is £109.40 per week (the previous rate was £99.35).

Statutory Sick Pay is payable from the 4th consecutive day of absence. The above rate of SSP is per week and is payable for a maximum of 28 weeks. The employee must earn the Lower Earnings Limit (LEL) or above to qualify. The LEL for 2023 remains at the 2022 level which is £123 per week (the rate in 2021 was £120).

The daily rate of SSP is calculated by dividing the weekly amount by the number of qualifying days in the week. To calculate the rate for a number of days, the unrounded rate is multiplied by the number of days and rounded up to a whole penny. For daily rates, see the Gov.uk website.

Statutory Maternity Pay (SMP)

For employees who earn more than the Lower Earnings Limit:

Length of service Maternity leave SMP
Less than 26 weeks’ continous service at the beginning of the 14th week before the Expected Week of Childbirth (EWC) Up to 52 weeks No entitlement to pay
26 weeks’ continous service at the beginning of the 14th week before the Expected Week of Childbirth (EWC) Up to 52 weeks First 6 weeks at 90% of employee’s average weekly earnings (even if this is less than the SMP weekly rate)

Following 33 weeks at £172.48 per week from 2 April 2021 (previously at £156.66) OR 90% of earnings (whichever is less)

The remaining 13 weeks are unpaid

Notice to take maternity leave must be given by the employee to the employer no later than the end of the fifteenth week before her expected week of childbirth or, if that is not reasonably practicable, as soon as is reasonably practicable.

Women who work in an unpaid capacity in the business of a self-employed spouse or civil partner are entitled to receive a weekly maternity allowance. This is payable for up to 14 weeks.

Statutory Paternity Pay (SPP)

Subject to meeting the eligibility criteria, working fathers have the right to two weeks’ paid paternity leave. This is paid at the same rate as the lower rate of SMP, ie £172.48 per week from 2 April 2023 (previously £156.66 from April 2022).

Statutory Adoption Pay (SAP)

Subject to meeting the eligibility criteria, one of the adoptive parents may take paid adoption leave when a child is first placed with a family. Payment for adoption leave is at the same rate as lower rate SMP, ie: the lesser of £172.48 from 2 April 2023 (previously £156.66 from April 2022), or 90% of earnings.  The first six weeks of SAP is paid at 90% of earnings (even if this is less than the SAP weekly rate).

Shared Parental Pay (ShPP)

Shared parental pay is paid at £172.48 from 2 April 2023, (previously £156.66 from April 2022), or 90% of the employee’s average weekly earnings, if this figure is lower.

Statutory Parental Bereavement Pay (SPBP)

Statutory Parental Bereavement Pay will be paid at £172.48 from 2 April 2023, (previously £156.66 from April 2022), or 90% of the employee’s average weekly earnings, if this figure is lower.

Recover a proportion of payments from HMRC

SMP, SPP, SAP, ShPP or SPBP may be reimbursed to the employer. The rate depends on how much the employer has paid in National Insurance Contributions in the previous tax year. This is as follows:

  • up to £45,000 paid in NI contributions – 103% of SAP paid
  • £45,000 or more paid in NI contributions – 92% of SAP paid.

Employer-supported childcare

Tax-Free Childcare Scheme

Working parents may claim 20% tax relief of £2,000 per child, (£4,000 per disabled child) in respect of their childcare costs for children aged 12 and under (16 and under for disabled children). The maximum tax relief will be provided as long as both parents are in work (one parent in the case of lone parent families); each earns at least £120 per week, but less than £100,000 per year, and they do not already receive support through tax credits or universal credit. This may result in a significant reduction in the use of childcare vouchers. Parents are required to confirm their eligibility in respect of their child’s details and employment status before setting up a digital account with childcarechoices.gov.uk. For every 80p invested by the parents, a further 20p is added (40p for disabled children). Parents have an account for each eligible child but they can be accessed through a single log-in. The money can be used towards childcare costs through an Ofsted registered provider and parents are able to select their childcare providers, link them to their child and arrange payments all through the digital account.  Each child has a unique reference, which will allow the provider to link payments received from the account to the child concerned.

Childcare vouchers

Employers who already had employees enrolled in a scheme before 4th October 2018 may continue to contribute up to £55 per week (£243 per month) towards childcare costs, free of National Insurance contributions and subject to tax relief (see below), provided this benefit is offered to all employees. The payment may be made by voucher or otherwise and the care must be provided by an approved child carer, whether registered childcare or approved home-childcare. For those who joined a scheme on or after 6 April 2011, the tax relief is restricted to the standard income tax rate of 20%. Employees who joined a scheme before 6 April 2011, who remain in their current employment and during that period there has not been a continuous period of 52 weeks throughout which vouchers and/or childcare were not being provided for the employee under the scheme, continue to get full tax relief. For more guidance on operating the scheme, see the HMRC guidanceThis scheme is closed to new applicants, in favour of the above tax-free childcare scheme.

Guarantee payments (“lay-off pay”)

The guaranteed daily rate for employees who are laid off work under the Employment Rights Act 1996 is £31.00 per day from 6th April 2022.

Employees are entitled to guarantee payments for up to five workless days in any three month period. Where the normal working week is less than five days, the number of days’ entitlement to guarantee pay is reduced accordingly.

Limit on ‘a week’s pay’ for redundancy and compensation awards

The maximum weekly wage used for calculating statutory redundancy payments, basic awards, and other statutory compensation is £571 for those taking effect on or after 6 April 2022 (previously £544).

Future increases take effect on 6 April each year. These rates are based on RPI figures, rounded up to the nearest £1.

Statutory Redundancy Pay (SRP)

The amount of Statutory Redundancy Pay is the ‘number of weeks’ multiplied by the lower of either the actual average weekly wage or a maximum weekly wage of £571 for those taking effect on or after 6 April 2021.

The ‘number of weeks’ relates to the employee’s age and completed years of continuous service as at the date the notice period would expire. The maximum number of weeks is 30, therefore the maximum statutory redundancy payment is £16,320 for dismissals taking effect on or after 6 April 2021.

Future increases will take effect on 6 April each year. These rates are based on RPI figures, rounded up to the nearest £1.

Public sector workers: a cap of £95,000 applies to payments made to public sector employees for loss of employment. This includes any redundancy pay, pay in lieu of notice, ex gratia exit payments or other payments made due to loss of employment.

It is in addition to a separate measure that is now in place which requires employees who earn over £80,000 to repay some or all of their exit payment if they return to a public sector role within 12 months. For more detail on the recovery of public sector exit payment, visit Gov.uk.

Tribunal awards

The awards made by the employment tribunal are as follows:

Unfair dismissal
Compensation for unfair dismissal is made up of a basic award which is similar to a redundancy payment (therefore a maximum basic payment of £17,130 (with effect from 6 April 2022) and a compensatory award. The maximum compensatory award a tribunal can award to an employee who brings a successful unfair dismissal claim is the lower of £93,878 or 52 times the ex-employee’s gross weekly pay for dismissals occurring on or after 6 April 2022.

Note: the calculation for a “week’s pay” is set out in Part 14 of the Employment Rights Act 1996 and is either the amount payable under the contract for working normal hours in a week or, where the pay varies with the amount of work done, the average amount paid over the 12 weeks prior to dismissal. It therefore does not include other elements of the remuneration package, such as benefits (pension, car, health cover etc). Note also that salary sacrificed under a salary sacrifice arrangement is not included within the definition of a “week’s pay”. The maximum total basic and compensatory awards for unfair dismissal £111,008 for dismissals occurring on or after 6 April 2022.

Note also the following:

Automatic unfair dismissal
Basic award: a minimum basic award of four weeks’ pay (£2,284 as from 6 April 2022) is made where a dismissal is regarded as automatically unfair under section 98A(i) of the Employment Rights Act 1996 if the basic award is less than this amount. However, such an award need not be made where it would result in injustice to the employer.

Unfair dismissal – related to specific statutory reasons
Basic award: a minimum basic award for an unfair dismissal claim where the reason related to either the complainant’s appointment as a Health and Safety representative, exercise of rights under the Working Time Regulations, activities as a pension scheme trustee, activities as an employee representative in connection with redundancies or a transfer of undertakings, is £6,959 as from 6 April 2022.

Union membership
The minimum basic award for dismissal or selection for redundancy on grounds related to union membership or activities is £6,959 as from 6 April 2022. In respect of a dismissal being regarded as unfair because it relates to a prohibited trade union blacklist, the minimum basic award will be £5,000 from 6 April 2022. The minimum compensation awarded for exclusion or expulsion from a trade union is £10,132 as from 6 April 2021.

No award limits
There is no limit on the amount of compensation for cases of whistleblowing, certain health or safety matters, or discrimination due to a protected characteristic.

Injury to feelings
Awards in discrimination cases may also include a compensation award for ‘injury to feelings’. Guidance on injury to feelings awards was set out by the Court of Appeal in Da’Bell v NSPCC (these are known as the “Vento” bands set out in the Vento vs Chief Constable of West Yorkshire Police). These bands are reviewed annually.

For claims issued on or after 6 April 2022, the bands are:

  • lower band: £990 to £9,900 – to reflect less serious cases (for example minor one-off occurrences)
  • middle band: £9,900 up to £29,600 – for serious cases that don’t merit the highest awards
  • upper band: £29,600 up to £49,300 – for more serious cases (for example a campaign of harassment)
  • exceptional cases: £49,300 to unlimited

Damages for personal injury
Where this covers long-term loss of earnings, the award is discounted to reflect the fact that it is paid upfront in one go and can be invested. The reduction was 0.75% since 2017, however, in this was ammended in 2019 to 0.25%. This may result in higher awards for long-term loss of earnings for personal injury in discrimination and detriment cases.

Breach of contract claims
The maximum award a tribunal can make is £25,000.

In addition, the tribunal may award for the following:

  • Refusal of right to be accompanied at a grievance or disciplinary meeting: 2 x a week’s pay
  • Failure to consider a flexible working request: 8 x a week’s pay
  • Failure to provide written particulars of employment: either 2 or 4 x a week’s pay

Interest is incurred if the awards are not paid within 42 days (or within 14 days in discrimination cases). Tax and NI are not normally deducted if the payment is made to an ex-employee, unless over £30K or reinstatement has been ordered.

Aggravated breach of employment rights
The minimum penalty is £100 and the maximum award a tribunal can make is £20,000.

Income tax

2022-23 tax year

England and Northern Ireland:

  • personal tax allowance: £12,570 per annum
  • basic tax rate limit:  20% on annual earnings above the PAYE tax threshold and up to £50,270
  • higher tax rate: 40% on annual earnings from £50,271 to £150,000
  • additional tax rate: 45% on annual earnings above £150,000

Scotland:

  • personal tax allowance: £12,570 per annum
  • Scottish starter rate – 19% on annual earnings above the PAYE tax threshold and up to £2,162
  • Scottish basic rate tax – 20% on annual earnings from £14,733 to £25,688
  • Scottish intermediate tax rate – 21% on annual earnings from £25,689 to £43,662
  • Scottish higher tax rate – 41% on annual earnings from £43,663 to £150,000
  • Scottish top tax rate – 46% on annual earnings above £150,000.

Wales:

  • personal tax allowance: £12,570 per annum
  • Welsh basic tax rate:  20% on annual earnings above the PAYE tax threshold and up to £37,700
  • Welsh higher tax rate: 40% on annual earnings from £37,701 to £150,000
  • Welsh additional tax rate: 45% on annual earnings above £150,000

2021-22 tax year

England and Northern Ireland:

  • personal tax allowance: £12,570 per annum
  • basic tax rate limit:  20% on annual earnings above the PAYE tax threshold and up to £37,700
  • higher tax rate: 40% on annual earnings from £37,701 to £150,000
  • additional tax rate: 45% on annual earnings above £150,000

Scotland:

  • personal tax allowance: £12,570 per annum
  • Scottish starter rate – 19% on annual earnings above the PAYE tax threshold and up to £2,097
  • Scottish basic rate tax – 20% on annual earnings from £2,098 to £12,726
  • Scottish intermediate tax rate – 21% on annual earnings from £12,727 to £31,092
  • Scottish higher tax rate – 41% on annual earnings from £31,093 to £150,000
  • Scottish top tax rate – 46% on annual earnings above £150,000.

Wales:

  • personal tax allowance: £12,570 per annum
  • Welsh basic tax rate:  20% on annual earnings above the PAYE tax threshold and up to £37,700
  • Welsh higher tax rate: 40% on annual earnings from £37,701 to £150,000
  • Welsh additional tax rate: 45% on annual earnings above £150,000

2020-21 tax year

England and Northern Ireland:

  • personal tax allowance: £12,500 per annum
  • basic tax rate limit:  20% on annual earnings above £12,500 and up to £37,500
  • higher tax rate: 40% on annual earnings from £37,501 to £150,000
  • additional tax rate: 45% on annual earnings above £150,000

Scotland:

Following Scottish Parliamentary approval, 2019 to 2020 rates remained operative until 10 May 2020 which were then superseded by the rates below:

  • personal tax allowance: £12,500 per annum
  • Scottish starter rate – 19% on annual earnings above the PAYE tax threshold and up to £2,085
  • Scottish basic rate tax – 20% on annual earnings from £2,086 to £12,658
  • Scottish intermediate tax rate – 21% on annual earnings from £12,659 to £30,930
  • Scottish higher tax rate – 41% on annual earnings from £30,931 to £150,000
  • Scottish top tax rate – 46% on annual earnings above £150,000.

Wales:

  • personal tax allowance: £12,500 per annum
  • Welsh basic tax rate:  20% on annual earnings above £12,500 and up to £37,500
  • Welsh higher tax rate: 40% on annual earnings from £37,501 to £150,000
  • Welsh additional tax rate: 45% on annual earnings above £150,000

Apprenticeship levy

UK employers with an annual wage bill of £3 million or more have to pay a 0.5% levy on their total pay bill to fund apprenticeship training. The levy is reported and paid to HMRC through the PAYE process.

Class 1 National Insurance thresholds

2022-2023

Lower earnings limit remains at £123 per weel/£533 per month

2021-2022

Lower earnings limit remains the same at £120 per weel/£520 per month/£6240 per annum

2020-2021

Lower earnings limit increase to £120 per week/£520 per month/£6240 per annum
For the current primary, secondary, upper and additional thresholds, view on Gov.uk

Student Loan recovery

2022-23 tax year

  • Plan 1 loans: the employee earnings threshold will increase to £20,195 per year
  • Plan 2 loans: the employee earnings threshold will increase to £27,295 per year. This figure will apply to all current and future borrowers for whom employers make Student Loan deductions.

2021-22 tax year

  • Plan 1 loans: the employee earnings threshold will increase to £19,895 per year
  • Plan 2 loans: the employee earnings threshold will increase to £27,295 per year. This figure will apply to all current and future borrowers for whom employers make Student Loan deductions.

2020-21 tax year

  • Plan 1 loans: the employee earnings threshold will increase to £19,390 per year
  • Plan 2 loans: the employee earnings threshold will increase to £26,575 per year. This figure will apply to all current and future borrowers for whom employers make Student Loan deductions.

Taxation of company cars

The benefit charge for a company car is calculated initially as a percentage of the car’s list price. The percentage charge depends on the car’s rated CO2 emission level, starting at 7% for the most efficient vehicles (the 0-50g CO2/km band) and 11% for the 51-75g CO2/km band.

To find out full details of your obligations in respect of company cars and fuel, you can read the government’s latest update here.

The VCA website provides details of individual cars as well as tax bands.

HMRC has a Company Car and Car Fuel Benefit Calculator which can be used to calculate car and car fuel benefit-in-kind values and to get an indication of the tax that will be payable on the calculated values.

Car fuel benefit

Fuel benefit charge (FBC) applies where an employee who has a company car is provided with free fuel for his/her private use. The fuel benefit charge is based on the level of CO2 emissions of the car, and the same percentage figures are used for the company car benefit charge.

To calculate the benefit charge on free fuel, the percentage figure is multiplied against a set figure of £24,600 for the 2021/22 tax year (previously £24,500 for the 2020/21 tax year).

Employer provided vans

Employers providing company vans and fuel to their employees have certain national insurance and reporting obligations.  Details of which are available on the government website “expenses and benefits: company vans and fuel“.

Authorised mileage rates – own vehicle

Employees who use their own vehicles for business travel (irrespective of engine size) may claim the following payments free from tax and NICs:

Cars and vans:
up to 10,000 miles: 45p per mile
over 10,000 miles: 25p per mile

Motorcycles:
24p per mile (irrespective of how many miles)

Bicycles:
20p per mile (irrespective of how many miles)

Authorised mileage rates – company-provided vehicles

The HMRC advisory rates used to negotiate dispensations for mileage payments for business travel in company cars are below (rates as at 1st June 2022). They only apply where employers reimburse employees for business travel in their company cars or require employees to repay the cost of fuel used for private travel.

Engine size (petrol or LPG):

up to 1400 cc
petrol: 14p
LPG: 9p

1401 – 2000 cc
petrol: 17p
LPG: 11p

over 2000 cc
petrol: 25p
LPG: 16p

Note: petrol hybrid cars are treated as petrol for this purpose.

Engine size (diesel):

up to 1600 cc: 13p
1601 – 2000 cc: 16p
over 2000 cc: 19p

Advisory Electricity rate for fully electric cars

Amount per mile – 5p

Electricity is not a fuel for car fuel benefit purposes.

Hybrid cars are treated as either petrol or diesel cars for advisory fuel rates.

The rates are reviewed four times a year, with any changes taking effect at the beginning of each calendar quarter (on 1 March, 1 June, 1 September and 1 December). Further updates are available on the HMRC website, as well as information on how the advisory fuel rates are calculated.

Non taxable payments or benefits for employees

You can find all the information in regard to non-taxable payments or benefits for employees on the Government website.

A guide to the income tax (earnings and pensions) Act 2003

The HMRC Employment Income Manual sets out guidance on all employment income tax and relief rules.

Hospitality to employees

Employers are allowed to provide hospitality tax-free to employees (eg summer events, Christmas party) up to a total maximum of £150 per employee per year, provided that this is available to all employees. This limit applies to everything – hire of facilities, food, drink, entertainment, incidental costs, transport, overnight accommodation and VAT.

Loans to employees

Employers are allowed to provide employment-related interest-free loans (such as those for season tickets) of up to £10,000. As long as the total outstanding balances on these loans do not exceed the threshold at any time in a tax year, there will be no tax charge.
HMRC provides more detailed guidance.

Termination payments

The following termination payments are tax-free, up to a total maximum of £30,000:

  • statutory redundancy pay
  • non-statutory redundancy pay
  • ex-gratia payments on the death or disability of an employee
  • compensation for wrongful dismissal
  • certain other termination payments for which the employee has no contractual entitlement.

As from April 2020, termination payments over £30,000 that are subject to income tax will also be subject to the employer’s NICs. All payments in lieu of notice (irrespective of whether these are contractual or not) would be subject to income tax and NICs in the same way as other earnings but calculated using the PENP formula; and the rules would be tightened to prevent certain contractual payments being paid as damages (thus avoiding the tax and NICs). The exemption for foreign service would be removed. Other termination payments up to £30K (such as redundancy pay) would remain tax-free; employees would not need to pay NICs on any of the termination payments (including anything above the £30K threshold).

Termination payments

PILON: Broadly speaking, the basic pay which would have been received if the notice period was worked, will be subject to tax and NI in full, irrespective of a contractual right to make a payment in lieu of notice. However note that PENP calculation for payment of notice pay in lieu arises when an employee receives no notice, or less notice than is due to them when their employment is terminated. It represents how much basic pay the employee would have received if they had worked the full notice period which they are/were entitled to.  Any remaining balance will then be subject to the normal rules (including any remaining amount that is eligible for the £30,000 exemption in a settlement payment).

In this circumstance ‘basic pay’ is the amount of gross pay received in the pay period immediately prior to the date the notice (or the date the dismissal without notice) is given.

Disability Exemption: There is a 100% tax exemption on termination payments made on account of a disability or injury which prevents the individual from carrying out their duties. This exemption will no longer apply to any payment made by way of compensation for ‘injury to feelings’, unless the injured feelings are deemed to be a psychiatric injury.

Foreign service exemption or relief: Employees who may previously have been able to claim for the exemption or relief in respect of a period of time spent working abroad, will no longer be able to claim this where employment ends on or after 6 April 2018 and a termination payment is received after the 13 September 2017, if they are a tax resident in the UK in the tax year when employment ends. Therefore, the normal statutory residence test will apply. (This change will not affect seafarers).

Relocation

An employer may provide up to £8,000 tax free to an employee to help them to relocate (any additional sums are taxable).  See the Government guidance.

State pension

For the current state pension rates and how it is paid, click here.

The full basic state pension for a single person is £141.85 per week from April 2022.

The new State pension for those eligible is £185.15 per week as of 2022

Pension contributions

There are two limits on an individual’s tax-relieved pension savings, in the form of an Annual and Lifetime Allowance. The Annual Allowance on which tax relief on pension savings is granted is £40,000. The Lifetime Allowance, the limit on the amount of pension benefit that can be drawn from pension schemes (whether lump sums or retirement income) and can be paid without triggering an extra tax charge, is £1,073,100.

The Government has limited the range of benefits that attract income tax and NIC advantages when provided as part of a salary sacrifice scheme, but has retained these for pension contributions, childcare and health-related benefits (such as the cycle to work scheme).

Pension savers in defined contribution schemes may draw their pension from the age of 55 either as a lump sum, a full amount or using a drawdown arrangement. This is regardless of the size of the pension pot. The money purchase annual allowance (the amount that may be paid into the pension scheme and attract tax relief)  is cut from £10,000 to £4,000 (for the 2020/21 tax year). The aim is to prevent those aged 55 and over from enjoying double pension tax relief, such as relief on recycled pension savings.

Auto-enrolment pension schemes

The minimum overall contribution rate, that you and your employee must pay in, into an auto-enrolment scheme is 8% of ‘qualifying earnings’.

‘Qualifying earnings’ are based on income within the ‘Qualifying Earnings Band’, currently the Lower Earnings Limit and the Upper Earnings Limit. The Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2017 sets out the rounding figures to be used for different pay reference periods.
2022-2023 tax year will be the same as the 2021-2022 tax year as follows: The automatic enrolment earnings trigger (the point at which an eligible worker must be automatically enrolled into a workplace pension) remains at £10,000. The qualifying earnings band (on which the contributions are based) will remain aligned with the National Insurance contributions Lower Earnings Limit (LEL) and Upper Earnings Limit (UEL). The LEL is also the point at which those who earn less than the earnings trigger may choose to opt in. In summary:

  • Automatic enrolment earnings trigger: £10,000
  • Lower limit qualifying earnings band: £6,240
  • Upper limit qualifying earnings band: £50,270

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Our latest 2023/24 SME Business Survey sheds light on the intricate dynamics shaping the SME sector and unveils critical insights that can guide businesses toward sustainable success.

IF YOU WISH TO PURCHASE HR ADVICE LINE TIME, PLEASE COMPLETE THE FORM BELOW.

HR Solutions are here to help. We offer a standard hourly rate package for ad hoc HR advice which means you can pay for what you need, whenever you need it, and then quickly get advice. Our highly experienced advisors are on hand to provide you with practical employment advice to help you manage your workforce.  You can purchase HR Advice Line time now, and the time purchased will be valid for 12 months.