UK Payroll News

New employers have an instant start date for auto-enrolment duties

Any new employers that set up their business from October 2017 will not have a staging date, so their AE duties start as soon as they take on their first member of staff. Employers with instant duties will also need to complete a declaration of compliance within 5 months of their duties start date.

 

Automatic enrolment changes

On 6th April 2018, all employers will be required to increase the minimum contribution from the current level of 2% of qualifying earnings to 5%. Employers must contribute at least 2%.

 

No Employment Allowance for single director companies

From April 2016, single director companies will not be able to claim the Employment Allowance as it goes contrary to the policy of encouraging employers to employ more employees when these companies will not be doing so. This is on going for subsequent tax years.

 

PILON’s = Payments in lieu of notice

From 6th April 2018, all payments in lieu of notice, whether contractual or non-contractual – will be fully subject to a charge of tax and class 1 NICs.
This rule change is intended to end the confusion regarding the treatment of PILON’s that existed before 6th April 2018.
The change introduces the concept of ‘post-employment notice pay’ which represents the amount of basic pay the employee will not receive because their employment was terminated without full or proper notice given.

 

GDPR

On 25th May 2018, the General Data Protection Regulation (GDPR) will be implemented in the UK. It will apply to personal data processed within the EU and to organisations outside the EU that supply goods and services to individuals within the EU. It is no longer adequate to say you comply with the regulations, you will be required to demonstrate it and appoint a data protection officer within your organisation, no matter how small. Transferring information by email will no longer be acceptable, unless it is encrypted.

 

Payrolling Benefits in Kind

PAYE legislation is changing. If you intend to or already payroll benefits and expenses you must register them with HMRC before 6th April 2018 using their new online Payroll Benefits in Kind (PBIK) service for 2018-2019 tax year. If you use this service and tax your employees’ benefits and expenses through payroll you won’t have to report them on a P11D. This will be on going for subsequent tax years i.e. you need to register before the start of the tax year.

 

Student Loan Deductions

From 6th April 2016 there will be an additional loan deduction – the original Student Loan will be known as Plan Type 1 with an Earnings Threshold of £17495.

The new Loan type will be Plan Type 2 with an Earnings Threshold of £21,000. P45 will not be changed but a revised Starter Checklist will ask the questions on this – if employee doesn’t know which type they are paying then employers must use Plan Type 1 until HMRC inform otherwise. Student Loan % = 9.

 

Dispensations

All dispensations cease on the 5th April 2016 and are replaced by Expenses exemption except for Benefits which are payrolled and detailed in the in the Payrolling Benefits in Kind section. Employers need to decide what does not need to go on a P11D as a business expense and ensure they have an expense policy.

 

Payrolling Benefits in Kind 2016/17

Optional for employers to decide i f t hey wish to payroll t heir Benefits in Kind (BIK) for the 2016/17 Tax Year. All BIK’s can be payrolled apart from Living Accommodation, Credit Cards & Vouchers, and Beneficial Loans. Employers must have registered with HMRC before 5th April 2016 in order to do this for the 2016/17 Tax Year.

Any current dispensation given by HMRC, to payroll BIK will cease on the 5th April and in order to continue employers will need to register with HMRC before the 5th April 2016. Once registered, employers can choose which benefits to payroll and which employees to exclude as they could be Long Term sick, Mat leave or on sabbatical with no pay or employee does not wish to have benefit payrolled.

Please inform your payroll contact if you decide to do this before pay period 01 of 2016/17 commences. This will mean no P11D or P46 Car for such employees in respect of 2016/17 onwards.

 

Child Care Vouchers

From early 2017 (date to be announced) no-one can enter into a CCV scheme. There will be a new Tax Free Childcare scheme which will not impact on employers. Where for every 80p the parents put into an account the Government will put in 20p.

 

National Living Wage

April 2016 April 2017 Adult rate (25 and over) £7.20 TBA

Payroll Rate Changes from 6th April 2015

TypeRate
Personal allowance (up to age 65)£10,600.00 per annum
National Insurance earnings threshold£155.00 per week
Statutory Sick Pay (SSP)£88.45 per week
Statutory Maternity / Paternity / Adoption pay£139.58 per week

Tax freezes announced in Queen’s speech

Tax and National Insurance will be frozen for 5 years and the personal allowance raised to £12,500 by a range of new laws announced in the Queen’s speech. It also announced that free childcare will be doubled to 30 hours a week.

Advisory Fuel Rates

The advisory fuel rates changed on 1st June 2015. The rates are used to repay employees tax-free for fuel used on business mileage. They only apply where employers reimburse employees for business travel in their company cars or require them to repay the cost of fuel used for private travel. Click here for the new rates

Change to Employment Allowance

From April 2015 individuals who employ personal carers are now eligible to claim the Employment Allowance

No penalties for short filing delays

Employers will not incur penalties for delays of up to three days in filing RTI information from March HMRC has announced.

New Marriage Allowance

From 6th April 2015, if you are married or in a civil partnership you can now transfer £1,060 of unused personal allowance from one spouse or civil partner to the other. It will save the couple tax of £212 for 2015-16. The marriage allowance can only be claimed where one person has unused personal allowance and the other partner is taxed at no more than 20%. The claim must be done online through the GOV.UK website by the person transferring their allowance.

Penalty notices for late RTI reporting now in force

Filing penalties came into force on 6 October 2014 for businesses with schemes of 50 or more employees. Those affected will receive a letter outlining the penalties incurred for October to December quarter 2014. HMRC issues a penalty when the Full Payment Submission (FPS) is late, it has not received the expected number of FPSs or when it has not received an Employer Payment Summary if no employees have been paid in a tax month. The largest employers can face charges of up to £400 a month. Penalties will also start in March 2015 for those with 49 or less staff where fines are limited to £200 for between 10 and 49 staff and £100 for 9 or less. Each penalty on the notice will carry an identification number and details of the procedure to follow if they want to appeal.

P35 declaration no longer mandatory

HMRC have said that the tax year end P35 questions are no longer required for the 2014-15 tax year end procedure. The decision may be too late for some software companies for this tax year, in which case you will still need to provide the P35 declaration as usual

Abolition of employers’ NI for under 21’s

From 6th April 2015, employers will not have to pay Class 1 National Insurance contributions for employees under 21 years of age. This is restricted to earnings up to the Upper Earnings Limit which is expected to be £813 per week for the 2015-16 tax year.

New rights to time off for ante-natal appointments

From 1st October 2014 an employee who is the partner of a pregnant woman is entitled to take time off during working hours so they can accompany the woman when she attends an ante-natal care appointment which is made on advice of a medical practitioner, midwife or nurse. This is limited to no more than two appointments, with the maximum time off during working hours for each appointment being no more than 6.5 hours.

Holiday pay ruling

Where an employee’s salary includes regular sales commission, that commission must be included in holiday pay according to the latest ruling by the European Court of Justice. This concerns the four weeks statutory minimum holiday, not the 5.6 weeks granted in the UK. The court has held that workers must not be discouraged from taking annual leave therefore holiday calculations should include an allowance for commission to prevent workers from suffering any disadvantage. Employers should consider the implications of this outcome and undertake a review of their contracts and policies to ensure it is clear how holiday pay is calculated.

Flexible Working Regulations

The new provisions came into force on 30th June 2014. They extend the right to make request for flexible working to any employee who has been employed for 26 weeks, not just to certain parents and carers as is currently the case. More than a quarter of British workers are likely to make a flexible working request.

Interest on late HMRC payments

HMRC now charges interest on any late PAYE and Construction Industry Scheme payments. For employers that pay monthly, the first payment of the 2014-15 tax year was due 19th May or 22nd May if paying electronically. From the date the payment is due to the date it is paid in full, HMRC will charge interest daily. To avoid an interest charge employers should pay by the due date the amounts reported on their Full Payment Submission (FPS) less any deductions reported on an Employer Payment Submission (EPS) if applicable.

Maximum Penalty for illegally employing an immigrant doubles

From 14th May, the Immigration Act 2014 states that where an employer is found to have employed workers who are subject to immigration control but do not have the right to work in the UK, the maximum penalty has now increased from £10,000 to £20,000 per illegally employed worker. Employers must make sure they are up to date with right-to-work checks and legal requirements or face serious consequences including criminal prosecution.

P46 obsolete

From 6 April 2014, HMRC have replaced the P46 starter forms on its internet site with starter checklists to help employers gather the information needed to submit a full payment submission.

£2000 Employment Allowance

The new Employment Allowance is available from 6 April 2014. If you are eligible you can reduce your employer Class 1 NICs by up to £2000 each tax year. You can claim your allowance through your payroll software or HMRC’s Basic PAYE Tools. Reduce your employer Class 1 NICs payment due by an equal amount of employment allowance, but no more than £2000 per year.

Abolition of SSP Percentage Threshold Scheme

The current percentage threshold scheme for recovering Statutory Sick Pay will be abolished from April 2014. As SSP is often claimed in arrears, you will not be able to report SSP recovered once the SSP field is removed form the EPS from 6th April 2014. However employers will still be able to make late claims for sickness periods up to 5th April 2014 via the clerical process for RTI years.

National Minimum Wage penalties increased

Rogue employers who do not pay their workers the National Minimum Wage will face an increased penalty of up to £20,000 as part of government’s crackdown on employers who break the law. Currently the maximum penalty is £5,000.

Age Exception certificates ceased

HMRC have ceased issuing age exception cards for employees reaching state pension age. From now on, employers must obtain sight of an employee’s birth certificate or passport as evidence of date of birth. Both can be photocopied or scanned and kept on file as proof that employee’s NICs are no longer payable. If an employee is reluctant to provide a birth certificate, they can contact HMRC to obtain a letter confirming they have reached state pension age.

Cancelling new PAYE schemes

From October 2013, if HMRC have been contacted to set up a new PAYE scheme, but there has been no activity on the scheme, it will be automatically reviewed after 120 days to see if it can be cancelled. So if no RTI submissions have been made; no payments have been made to HMRC; there is no evidence of employees; there is no evidence that Class 1A NICs are due, then the PAYE scheme will be closed and a letter issued to the business address.

RTI ‘relaxation’ for small employers

HMRC have announced that they will extend the relaxation of the reporting requirement for RTI that payments to employees should be reported on or before each pay day. Extended until 5th April 2016, employers with fewer than 9 employees may send information to HMRC no later than the end of the tax month (5th).