Keeping your payroll up to date, check what's changed?

Not only is payroll important to ensure you are compliant with ever changing legislation, but your employees also expect to be paid accurately and on time. Achieving this ensures you build and maintain a happy and engaged workforce.

Keeping up to date with payroll legislation changes is key to an accurate payroll. In 2024 there have been several significant changes that will impact your payroll processes and it’s important that you are up to date with payroll and employement changes.

In this blog we cover the key payroll changes and how to keep your payroll processes up to date and correct.

Keeping your payroll up to date: UK legislative changes and payroll considerations for 2024

National minimum wage and national living wage

The National Minimum Wage (NMW) and the National Living Wage (NLW) rates set the minimum hourly wage that employers must pay their employees. Changes are as follows:

The National Minimum Wage (NMW) from 1 April 2024 is:

• £11.44 an hour for workers aged 21 and over;
• £8.60 an hour for workers aged 18-20;
• £6.40 an hour for workers under the age of 18; and
• £6.40 an hour for apprentices aged under 19 or in their first year.

The NLW, applicable to workers aged 25 and over is £11.44 per hour for 2024/25.

Tax and National Insurance thresholds

The standard personal tax allowance for 2024/25 will remain at £12,570. This has been frozen until 2027/28. There is also no change to the thresholds at which national insurance is due. This remains at £9,100 for employers and £12,570 for employees.

Changes in National Insurance (NI) rates

In 2024 there are significant changes to NI rates, affecting both employer contributions and employee contributions. These are as follows:

Decrease in contributions for Class 1

From 6 January 2024, the main Employee National Insurance (NI) rate was cut by 2% to 10%.

Self-Employed Class 2 NI

From 6 April 2024, self-employed individuals with profits above £12,570 are no longer required to pay Class 2 national insurance contributions.

Self-employed individuals with profits between the £6,725 Small Profits Threshold and the £12,570 Lower Profits Limit will continue to benefit from a National Insurance Credit after 6 April 2024 without having to pay Class 2 NICs, as they do now.

Self-employed Class 4 NI

From 6 April 2024, Class 4 NICs for self-employed people has been cut from 8% to 6%.

Holiday pay and entitlement reforms from January 2024

2024 brings notable changes in holiday pay and entitlement, designed to enhance the rights and compensation of employees:

Changes from 1 January 2024

The headline changes that came into effect from 1 January 2024 are as follows:

• Changes to the carryover of leave including leave affected by COVID-19.
• Change to the definition of irregular hours workers and part-year workers.
• Changes to the definition of a week’s pay for holiday pay calculations.

Changes from 1 April 2024 onwards

The headline changes which came into effect for holiday years commencing from 1 April 2024 onwards are as follows:

• Reintroduction of rolled-up holiday pay for irregular hours and part-year workers.
• Reintroduction of the 12.07% of hours worked calculation method for irregular hours and part-year workers.
• Changes to the definition of a week’s pay for holiday pay calculations.
• Changes to carry over of holiday rules.

Carryover of leave

From 1 January 2024, individuals are now entitled to carry over up to 28 days’ leave into the following leave year if one of the following conditions apply.

• the individual has been on sick leave (as long as it is taken within 18 months from the end of the leave year in which it was accrued);
• the individual has been on maternity or other family related leave;
• the employer has refused to pay the individual their paid leave entitlement;
• the employer has not given the individual a reasonable opportunity to take holiday;
• the employer has failed to inform the worker that untaken holiday at the end of the leave year will be lost.

Calculation of holiday pay

For workers with irregular hours and to ensure a more accurate calculation of holiday pay, holiday will accrue based on 12.07% of the hours worked by the individual in the previous pay period

Accrual of holiday entitlement

Employers have the option to implement rolled-up holiday pay for workers with irregular hours or part year workers. This allows employers to pay an additional amount in every payslip to cover a worker’s holiday pay, instead of just paying for holiday when a worker takes leave.

Flexible working

Although not directly associated with payroll, workers now also have the right to request flexible working from day one of a new job, with employers required to consider any requests and provide a reason before rejection. Other changes include:

• employees are no longer required to have 26 weeks’ continuous service before making a formal request
• employees will be able to make two flexible working requests within a year
• employers will be required to deal with requests within two months of a request being made
• employers must consult with the employee if they are turning down a request
• when making a request, employees no longer have to give an explanation of what the impact of the new working arrangement will have.

Statutory Paternity Pay (SPP)

Statutory paternity leave changes – Effective 6 April 2024

Employees can take either 1 or 2 weeks’ leave. If the employee is taking 2 weeks off, they can either be taken consecutively or separately. The amount of time is the same even if they have more than one child (for example twins).

Leave cannot start before the birth. The start date must be one of the following:

• the actual date of birth
• a specified number of days after the birth
• a set date which is after the date of birth

Leave must finish within 52 weeks of the birth (or due date if the baby is early).

The start and end dates are different if the employee is adopting.

Statutory paternity pay rates & notice period

Statutory Paternity Pay for eligible employees is either £184.03 a week or 90% of their average weekly earnings (whichever is lower). Tax and National Insurance need to be deducted.

The notice period for requesting SPL has been reduced to 28 days before the intended start date, offering more flexibility and accommodating last-minute changes.

Other statutory payments & leave

Statutory Sick Pay (SSP) has increased to £116.75 per week from 6 April 2024.

Statutory Maternity Pay (SMP) and Statutory Adoption Pay (SAP) pay is £184.03 per week or 90% of Average weekly earnings, whichever is the lower. This rate is the same for Statutory Paternity Pay (SPP), Parental Bereavement Pay and Shared Parental Leave.

From 6 April 2024, carers leave provides an unpaid entitlement to 1 week’s leave which can be taken in one block or flexibly.

Statutory redundancy pay has increased to a maximum of £700 per week from 6 April 2024.

Student loan thresholds

From 6 April 2024, new Student Loan thresholds took effect. These thresholds determine when employees are required to start repaying their student loans and when employers must take student loan deductions. The changes are as follows:

• The threshold for Plan 1 Student Loans increased to £24,990 per year.
• For Plan 2 Student Loans, the threshold remains frozen at £27,1295 per year.

Payrolling of benefits to be mandated by 2026

HMRC have also made an announcement that will significantly change payroll management from April 2026.

From April 2026 onwards, reporting and paying income tax and Class 1A National Insurance Contributions (NIC) on benefits-in-kind (BIK) will become mandatory through payroll software.

This change will remove the requirement for employers to file P11Ds and P11D(b)s at the end of each tax year. Instead, the employer will be required to report and collect Income Tax and Class 1A National Insurance on the benefits through the payroll in real time.

What should employers do?

It is crucial for employers keep their payroll systems up to date to reflect all of the changes above. You should also undertake regular reviews of your payroll processes.

Each tax year we see a raft of changes to thresholds, rates and employment legislation. Whether it’s income tax, national minimum wage, benefits, national insurance, tax calculation, tax codes, leaving employees or new employees, you need to regularly update payroll systems and processes.

In 2024 and beyond, payroll departments will have many changes to come to terms with and it’s becoming more and more complex to run an accurate and up to date payroll in-house.

Employers should review and update their payroll processes and seek professional guidance when necessary to navigate these changes.

How can dns accountants help with your payroll?

Say goodbye to worrying about paying yourself and your employees every month and let our team of payroll professionals help you with all your payroll compliance and auto enrolment needs.

We can provide leading payroll services and support to you and your business, giving you problem-free payroll processing. We will ensure that:

• All deadlines are agreed.
• You have a named contact.
• Guaranteed response times of 24 hrs or less.
• Data is fully validated and checked.
• All statutory requirements are met.
• Data is secure and backed up regularly.
• We use fully compliant payroll software.

Contact dns on 03300 886 686 or email us on enquiry@dnsaccountants.co.uk. today to find out more about our payroll services.

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About the author

Siddharth Agarwal
I am a Chartered Tax Advisor (OMB) and ACCA. I have 9+ years of experience in owner-managed business taxation issues, company reorganisations, property taxation, and succession planning. I also work with private clients on bespoke tax planning strategies for trusts, residence status, and non-residents. I aim to fulfil my professional duties towards my clients and keep them satisfied, my utmost priority. I believe in establishing and maintaining businesses and personal relationships as the key to mutual growth.