Employer’s What’s On: 2022/23

Changes to National Insurance 

There have been three key changes to National Insurance announced that affect the 2022-23 tax year which will have a significant impact on payrolls. See the National Insurance tab for full details.

Tax codes

• The basic PAYE tax code is set at 1257L for employees. This gives an employee a personal allowance of £12,570 for the year. This is the same as for 2021-22.

See What is the 2022/23 PAYE tax code? and PAYE Codes: Starters/leavers & 0T code

PAYE Settlement Agreements: a new digital version of the PSA1 form

• HMRC has redesigned the PSA1 form following feedback from employers. 
• A digital submission route has also been introduced which will allow employers to submit one form for all employees regardless of their location.
• If using the paper PSA1, employers may have to complete more than one form depending on where employees live.

See PAYE Settlement Agreements

Payment deadline and calculation reminder

• Tax and National Insurance owed under a PAYE Settlement Agreement (PSA) must be paid by 22 October after the tax year to which the PSA applies (19 October if you pay by post).
  • Late payments may result in penalties and/or interest being charged.
• Employers must send their calculations to HMRC even if there is no amount due to pay.
• If HMRC approves a PSA before the start of a tax year, employers can include any expenses and benefits contained in the agreement.
  • If the agreement is approved after the start of the tax year, employers might need to report some items separately.

See Employer Bulletin: August 2022

Employers PAYE: introduction of variable payment plan

• From 3 October 2022 (previously 19 September 2022) employers will be able to take advantage of a new variable Direct Debit payment plan.
• The service can be accessed through Pay employers’ PAYE or directly through the business tax account and the employers' PAYE service.
• A new link ‘Set up a Direct Debit’ will be introduced and this will allow employers to set up a Direct Debit instruction, authorising HMRC to collect directly from their bank account based on their return submissions.

See Employer Bulletin: August 2022 

Construction Industry Scheme (CIS)

From April 2022

• Limited companies must enter their Corporation Tax Unique Taxpayer Reference (CT UTR) or COTAX reference number in a new Employer Payment Summary (EPS) field to claim credit for CIS deductions as a subcontractor.
  • Any EPS submissions which include a claim for CIS deductions, but do not include the CT UTR will be rejected.

See CIS: Contractors and Subcontractors

Salaries & National Insurance Contributions (NICs)

• For discussion of the optimal monthly or weekly salary that can be paid by an employer without incurring a liability for employer or employee National Insurance Contributions, see Salary 2022/23 (avoiding NICs) which incorporates the changes to NICs rates announced in September 2022  (see National Insurance tab).

 PAYE deadlines

• For common recurring PAYE deadlines, including payment dates, see our Calendar of tax deadlines.  

National Living Wage (NLW)

From April 2022

• National Living/Minimum wage increased to £9.50 per hour.

NICs changes 2022-23

From 6 April 2022

• The Employee Primary Threshold increases from £9,568 to £9,880, and from 6 July 2022 increases to £12,570 p.a.
• The Employer's Secondary Threshold increases from £8,840 to £9,100.

NICs rates change part way through the year. Rates increased by 1.25% from 6 April 2022, then decreased on 6 November 2022.

• Employee main rate (2021-22: 12%):
  • 6 April 2022 to 5 November 2022: 13.25%
  • 6 November 2022 to 5 April 2023: 12%
  • Annual (directors): 12.73%
• Employee additional rate (2021-22: 2%): 
  • 6 April 2022 to 5 November 2022: 3.25%
  • 6 November 2022 to 5 April 2023: 2%
  • Annual (directors): 2.73%
• Employers' rate (2021-22: 13.8%):
  • 6 April 2022 to 5 November 2022: 15.05%
  • 6 November 2022 to 5 April 2023: 13.8%
  • Annual (directors): 14.53%

The 2022-23 Class 1A (benefits in kind) and Class 1B (PAYE settlement agreement) rates are 14.53%.

The Health and Social Care Levy, due to be implemented in April 2023, is abolished. 

See National Insurance: Rates

Freeports

From 6 April 2022

• A new relief for Employer National Insurance Contributions has been introduced as part of the Freeport tax offer.
• It applies a zero-secondary Class 1 NICs rate to the earnings of all new Freeports employees, up to £25,000 per annum from 6 April 2022 until April 2026, for 36 months per employee.
• Employers with premises in a freeport in GB will be exempt from employer’s NICs on up to £25,000 of a new worker’s wages.

See Freeports Tax Breaks

New investment zones

In the mini-budget on 23 September 2022 plans to develop new Investment Zones across the UK were announced. This was put on hold later in 2022 with a new Investment Zone plan being announced at Spring Budget 2023.

The new plan will not commence until Royal Assent of Finance (No2) Bill 2023 which will be after 5 April 2023.

• Zones are to be set up in 12 regions in England (of which the first eight have been announced already) over a five-year period.
• Businesses setting up in these zones will benefit from a variety of different tax breaks including:
  • A zero rate of Employers NICs for new employees taken on who work at the investment zone site for at least 60% of their time, for earnings up to £25,000 per year, for up to 36 months.

See Budget 2023: Investment Zones

Employers Allowance 

From 6 April 2022 

• The Employers NICs allowance increases to £5,000 (2020-22 £4,000).

See Employers' NICs allowance

National Insurance holiday for employers of veterans: claims process

• This relief allows employers who hire former members of the UK regular armed forces, during the first year of their civilian employment, to apply a zero rate of secondary NICs for up to 12 months.
• From 6 April 2022, employers can claim relief retrospectively for the period April 2021 to April 2022 through Real Time Information submissions going forward.

See Employer NICs relief for veterans

Proposed changes to Company Share Option Plan (CSOP) rules

At the mini-budget on 23 September 2022, it was announced that from April 2023:

• Qualifying companies will be able to issue up to £60,000 of CSOP options to employees. The current limit is £30,000.
• The ‘worth having’ restriction on share classes within CSOP will be eased, better aligning the scheme rules with the rules in the Enterprise Management Incentive scheme and widening access to CSOP for growth companies.

See Changes to CSOP rules

Taxable benefits

From April 2022

• Van benefit and Fuel benefit charges increase in line with the September 2021 Consumer Price Index.

• Van benefit increases to £3,600 and van fuel benefit to £668.
• Car fuel benefit increases to £25,300.

• ITEPA 2003 will be revised to update the official vehicle approval documentation recognised for determining the level of a vehicle’s CO2 emissions. This will include the new certificates of conformity to be introduced in 2022. The definition of a UK approval certificate will also be amended.

See Company cars

Homeworking

• The Office of Tax Simplification (OTS) has issued its last-ever report, ‘Hybrid and distance working: exploring the tax implications of changing working practices’.
• Key findings include a requirement for better guidance from HMRC on existing reliefs and rules and a demand for a review of tax reliefs in this area.

See OTS report on Hybrid and distance working

The official rate of interest for the 2022-23 tax year

• The official rate of interest which is used to calculate the Income Tax charge on the benefit of employment-related loans and the taxable benefit of employer-provided living accommodation remains at 2% for the 2022 to 2023 tax year.

See Official rate of interest 

Top-up for net-pay arrangements

• Finance Bill 2022-23 contains measures for HMRC to top-up payments directly to individuals who save into an occupational pension under net pay arrangements but whose total taxable income is below the personal allowance.
• Individuals making pension contributions to net pay schemes from 2024-25 will be eligible to claim a top-up. 

See Top-up for pensions

Increasing the normal minimum pension age

From 6 April 2028

• Finance Act 2022 includes a measure to increase the Normal Minimum Pension Age (NMPA) from 55 to 57.
• The NMPA is the minimum age at which most pension savers can access their pensions without incurring an unauthorised payment tax charge unless they are retiring due to ill-health

See Pensions: Unauthorised payment charges

Consultation on extending NHS pensions relief

• The Department for Health and Social Care (DHSC) has responded to consultation feedback on 'NHS Pension Scheme: proposed amendments to continue the suspension of restrictions on return to work'. This includes extensions to the scheme from 31 October 2022 and another consultation on 'flexible retirement and working'.
• As part of the government's response to COVID-19, rules in the NHS Pension Scheme were suspended from March 2020 to allow retired and partially retired staff to return to work or increase their working commitments without having their pension benefits suspended or abated. The suspension was due to run out 31 October 2022. 

See NHS Pensions relief feedback

Employment status

HMRC's Check Employment Status for Tax (CEST) tool provides HMRC’s view of a worker’s employment status.

• The CEST rests on the accuracy of the information provided, as there is no statutory employment status test the results of the CEST are capable of challenge.
• CEST can also be used to check if changes to contractual terms or working arrangements may alter a worker’s employment status.
• It can be used by a hirer, agency or worker.
• HMRC will stand by the results in the event of any dispute.
• Given the availability of this tool, it might be considered careless not to use it!

See HMRC CEST

Statutory employment status test

• In July 2022 the government finally gave a response to its June 2018 consultation on employment status: "Now is not the right time to overhaul the employment status frameworks for rights and for tax". At the same time, the government also dropped its Employment Bill.
• The government instead thinks that it can improve things for individuals and employers by publishing guidance for status and working time for minimum wage purposes.

• In March 2020 the House of Commons published a research briefing 'Insecure work, the Taylor Review and the Good Work Plan'. This is an overview of the recommendations made in the Taylor Review and the action the Government has taken to date and follows 'Good work', the government's response to the 2017 Taylor Review of Modern Working Practices. It now appears that many of the recommendations of the Taylor Review have been 'kicked into the long grass'.

Umbrella companies and tax avoidance

• HMRC has released Spotlight 60: 'Warning for agency workers and contractors employed by umbrella companies' which highlights features of umbrella companies that may indicate the arrangements amount to tax avoidance schemes.
• Features highlighted by HMRC to look out for include:
  • Disguised remuneration: money being received as a loan, salary advance, grant or annuity.
  • Documentation suggesting that some of these payments are not subject to tax.
  •  A discrepancy between the amount received in your bank account and the amount shown on payslips.
  • Umbrella companies retaining higher fees or margins and/or based outside the UK

See Spotlight 60: Umbrella companies and tax avoidance

In E.ON UK Plc v HMRC [2022] UKUT 196, the Upper Tribunal (UT) found that payments made by an employer, as part of a package of changes for employees, were compensation for loss of pension rights and not taxable employment earnings. 

In HMRC v Keith Murphy [2022] EWCA Civ 1112, the Court of Appeal decided that a success fee and indemnity premium to be paid out of an employment-related compensation settlement were not deductible for PAYE. Neither cost was incurred necessarily in the performance of the employee's duties as a serving police officer.

In Carlick Contract Furniture Limited v HMRC [2022] TC08543, the First Tier Tribunal (FTT) ruled that Coronavirus Job Retention Scheme (CJRS) claims for two employees were not qualifying costs as they had not been included within an RTI notification to HMRC before the relevant date despite the employees having been employed prior to that date. The FTT was sympathetic to the appellant's argument that their claim was within the spirit of the scheme but noted that they were bound by the legislation and had no scope to determine whether an outcome was fair or not,

In Alan Parry Productions Ltd v HMRC [2022] TC08519, the First Tier Tribunal (FTT) held that the control and mutuality of obligation tests were satisfied. The terms of Mr Parry’s contracts with BSkyB were consistent with him being an employee.

In Quayviews Limited v HMRC [2022] TC08515 , the First Tier Tribunal quashed late filing penalties imposed on an employer who had submitted its RTI returns between two and five months early: it had a reasonable excuse for not submitting the returns 'on time'. HMRC has not advised that very early filing was not allowed and their software allowed it.

In Kickabout Productions Limited v HMRC [2022] EWCA Civ 502, the Court of Appeal agreed that a TalkSPORT presenter, Paul Hawksbee was an employee subject to IR35. There was sufficient mutuality of obligation and control and any other factors considered added little to the case.

In Ian Moan v HMRC [2022] TC08449/V, the First Tier Tribunal (FTT) considered the deadline for opting out of auto-enrolment when an employer had provided incorrect information to the employee, who had consequently lost pensions fixed protection. They found that:

• The time limit for opting out of auto-enrolment runs from the date on which a jobholder is given enrolment information.
• Enrolment information had to be correct in order to start the clock.
• As the appellant delivered an opting-out notice prior to the receipt of the correct enrolment information, it could not have been delivered beyond the statutory deadline of one month.

The FTT allowed the appeal: the application to opt out of auto-enrolment had not been made out of time so there was no post-cessation event that removed the appellant's Fixed Protection.

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