Storyline: 6th APRIL DUBBED THE ‘EYE’ OF THE UK’S COST OF LIVING CRISIS AS ENERGY BILLS SPIKE AND NEW TAX INCREASES PUT ENORMOUS STRAIN ON HOUSEHOLDS

• As new National Insurance increases come into force on 6th April, research shows that almost two-thirds of employees still don’t understand the information in their payslips

• Almost half of workers (40%) said that they got little or no financial advice and support from their employer

The 6th April 2022 marks a new financial year for businesses. It also brings the start of an avalanche of new monetary challenges for the entire UK. Alongside the hugely publicised energy price increases, both UK employers and employees will also be facing further financial woes as new levies and taxes come into effect. Research from PayDashboard* has shown that UK workers are asking for more guidance and support from their employers on how to manage their pay, with 84% of those surveyed saying that they are considerably worried about their finances.

Further data from the study, which surveyed over 2000 people in the UK to understand more about their current financial position and the contributing factors to this, has shown that almost half of workers (40%) said that they got little or no financial advice and support from their employer. The research also indicated that for so many their concerns started on payday, with almost two-thirds of employees admitting that they often don’t understand the information on their payslip. Leading to concerns with monthly financial planning for so many.

The worrying statistics also revealed that over a third (38%) of the UK is, or has recently been, in serious debt. Amongst 18 – 34-year-olds specifically, 84% said that financial worries are having a significantly negative effect on their health.  Of those 46% who have felt more anxious and 35% admit to being depressed.

Laura Hughes at PayDashboard, believes that employers can do so much more to support and guide their staff, helping them to better understand the possible changes to their payslips, offering essential tips on how to re-claim any benefits or supplements entitled to them.

She commented: “There are many ways that employers can help. They must start by clearly outlining the big things that will impact their workers’ bottom line pay in 2022, such the Health & Social Care Levy. However, there are allowances, and tax breaks that employers and employees are entitled to help them claim some of this money back. Unfortunately, so many are unaware of this and we need to do more to educate and support our workers.”

PayDashboard’s Laura Hughes offers advice on what you need to know:

The new Health & Social Care Levy

From 6 April 2022, a 1.25 percent point increase to the main and additional rates of National Insurance contributions will take effect with revenue raised will go directly to support the NHS and equivalent bodies across the UK. Looking forward to April 2023, the Levy will be collected as a separate tax deduction (and currently, we are told that National Insurance contributions will return to their previous levels).

Employers have been encouraged to add some standardised wording to payslips from April 2022 to explain this change to their workforce. This is the first time that employers are being asked to explain a new legislation to their employees.

While they are only being asked to publicise the introduction of the levy, there is a wider impact for workers who will not receive a pay rise from March to April 2022. For the average worker not receiving a pay rise, their take-home pay will go down in April 2022 when the Levy comes into effect.

A worker earning £30,000 a year will pay around £214 more next year, a difference of around £17 a month. For those earning £50,000, the levy represents a £38 a month change.

Tax allowances are stagnant

Prior to 2020 we saw a rise in income tax bands or the personal allowances – resulting in employees taking home more net pay year to year. For 2021-22 the allowances remained the same in England, Wales and Northern Ireland, with some Scottish taxpayers seeing a minor change, and the same has happened this year. So with the introduction of the HSC Levy, and no increase to personal allowances or tax rates for the majority of UK workers, most employees will see their take home pay drop in April.

Where you can claim back:

Check your tax allowances

The Marriage tax allowance is often overlooked and, in fact, recent data has indicated that 2.4 million qualifying UK couples are missing out! Marriage tax allowance for the 2021/22 tax year is worth up to £252. But you could have the opportunity to claim for previous years too. If you are married or in a civil partnership, and one of you earned less than £12,570 personal allowance between 6 April 2021 and 5 April 2022, you may be entitled to around a £1,220 tax break. However, the other partner needs to be a basic 20% rate taxpayer and earning less than £50,270.
This simple guide explains it all New Tax Year 2021 - The Marriage Allowance guide | Download | Pay Dashboard

Salary Sacrifice

Salary Sacrifice is another way organisations can support their employees. Many companies will already have this in place through the Government’s popular Cycle to Work scheme, but more companies may look to offer Salary Sacrifice pensions in 2022 as this will offset some of the impact of increase National Insurance Contributions. With Salary Sacrifice, the deductions for pension contributions (or bicycles for the cycle to work scheme) is taken from an employee’s pay before tax and National Insurance deductions, so the employee pays less tax.

More information here: National Payroll Week 2021 - Salary Sacrifice | Download | Pay Dashboard

Claiming back your energy costs when WFH

While costs for travelling to work will have diminished, other expenses such as energy, internet costs and business calls are likely to have increase. Your employer can pay you a fixed rate of £6 a week to cover this (and you don’t have to declare it on a self-assessment tax return). However with many businesses feeling the pinch, not all companies can afford to do this. In which case, you can claim tax relief from the Government instead. But the rules have changed since Covid rules have lifted – and from 6^th April your ability to claim tax relief is only if you are required to work at home on a regular basis, either for all or part of the week. But you cannot claim tax relief if you choose to work from home.

The online portal for claims can be found here: Claim tax relief for your job expenses: Working from home - GOV.UK (www.gov.uk)

Don’t be taken in by online sites making the tax claim for you

Most tax breaks (including the marriage allowance and working from home) are very easy to claim yourself and you don’t need to do a self-assessment tax return. There are companies out there who will offer to assess you and make the claim for you for free. But they commonly keep 30-50% of your tax reclaim as their fee. So before you use a managed service like this, investigate what is required and whether you are willing to do it yourself in order to keep more of the cash.