Update on key developments affecting UK payroll

To keep you in the loop on changing compliance and regulations affecting UK payrolls, we’ve gathered the latest updates on various aspects that may impact your payroll operations, including mileage rates, tax incentives, neonatal leave and pay, paternity leave and pay, and student loan interest rates. Let’s delve into these important changes:

1. Changes to Student Loan Interest Rates

The Department for Education (DfE) has confirmed that interest rates for Student Loan Plans 2 and 5, as well as the Postgraduate Loan (PGL), will increase from September 1.

The structured changes in interest rates are as follows:

Between September 1 and November 30, 2023: Interest rates will be 7.3%.
Starting December 1, Plan 2 and the PGL will revert to the Retail Price Index (RPI) plus 3%, while Plan 5 interest rates will align with the RPI rate.

2. Tax Incentives for Occupational Health Consultation

The HMRC has initiated a consultation seeking input from employers regarding the existing benefit in kind exemptions for occupational health services. They are also exploring possibilities for expanding these exemptions. The consultation period concludes on October 12, 2023. Additionally, the Institute of Payroll Professionals (CIPP) is conducting a survey open until September 26, providing another avenue for employers to provide feedback.

Access the CIPP survey here.

3. Neonatal Leave and Pay Act 2023

The Neonatal Leave and Pay Act became law in May of this year, but no effective date was specified. The Department for Business and Trade has indicated that this legislation is likely to come into force around April 2025. The delay is attributed to the necessity of updating HMRC IT systems, creating guidance and support materials for employers and employees, and allowing parliament adequate time to consider the secondary legislation required for implementation.

The government aims to align this new leave and pay entitlement with the start of the new tax year.

4. Statutory Paternity (Leave and Pay) Bill

Introduced in response to a government consultation conducted in 2019 (paused during the pandemic), the Paternity (Leave and Pay) Bill proposes significant changes to paternity leave and pay management. If passed, the bill would broaden eligibility criteria for paternity leave and pay. Currently, eligibility is based on employment status, length of continuous service, and earnings level. The bill also provides for greater flexibility in the timing of leave and notice periods. Anticipated implementation date for this legislation is April 6, 2024.

5. Mileage Rates

Trade Unions and the RAC Foundation are advocating for an increase in mileage rates, citing the current cost-of-living crisis and the fact that these rates haven’t been updated since 2011. The last update in 2011 only raised them by 5p, marking the first change since their introduction in 2002.

Research and analysis have shown that individuals in lower-paid positions are experiencing an average annual loss of £6,000 due to outdated mileage rates that fail to keep pace with current living costs.

Keeping your payroll team informed about these updates is essential to ensure compliance and efficient payroll operations. Stay tuned for further developments, and make the necessary adjustments to meet the evolving regulatory landscape.

Hannah Powell

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