There have been many recent changes to payroll legislation. We thought it would be useful to bring them all together so that you can make sure that you and your business are fully up to date.
The National Minimum Wage and National Living Wage
The minimum wage a worker should receive depends on their age and whether they are an apprentice. The National Minimum Wage is the minimum pay per hour to which almost all workers are entitled. The National Living Wage is higher than the National Minimum Wage and workers receive this if they’re over 25.
The National Minimum Wage is £7.05 per hour for those adults aged under 25 and £5.60 per hour for those aged between 18 and 20 years old. Effective from 1st April 2017, the National Living Wage is now £7.50 per hour. Whether an employer is large or small, they still have to pay the correct minimum wage. It has been announced that HMRC will be doubling the penalties for non-compliance. Anyone found guilty could be considered for disqualification from being a company director for up to 15 years.
National Insurance for Apprentices and Employees
In addition to the charges announced last year, employees with apprentices under 25 will also be no longer required to pay Class 1 secondary NIC’s on earnings up to the upper earnings limit. Employees will still be required to continue to pay Class 1 contributions.
The National Insurance Employment Allowance
For the year from 5 April 2017, the allowance is unchanged at £3,000 per year. This is available as a deduction against the employer contributions paid, and continues to be unavailable where there is one employee director.
If you fall into this category and want to reconsider how you extract money from the company in the light of the change to dividends, please contact us so that we can advise you of the tax consequences of this change.
Real-time Collections on Tax Benefits in Kind
As mentioned last year, employers now have the opportunity to account for certain benefits in kind via the payroll. The benefits which are payrolled will not need to be included on a P11D but the class 1A NIC will still need to be calculated and reported on the P11Db. At present, the HMRC system will result in added work, and we are therefore not recommending this at present. The benefits which cannot be payrolled include employer provided accommodation, interest free and low interest loans in excess of £10,000 and vouchers or credit tokens.
The Abolition of Dispensations
These were abolished at from 6 April 2016, where a payment made to an employee does no more than reimburse the employee for expenses incurred. However, there is an exemption from reporting this expense on the P11D. This will apply to all expenses previously covered by dispensations if there was one in place. The only restriction to this is that the benefits are not provided under a salary sacrifice arrangement.
A new type of student loan deduction comes into effect from 6 April 2016. The new deduction will be known as plan 2 and has a separate threshold of £21,000. Existing loans will be known as plan 1. If employees have both types of loans, plan 2 will not be repaid until plan 1 is finished. The threshold for plan 1 loans will be £17,775 from 6 April 2017.
Pension Auto Enrolment
Auto enrolment is now happening. If your staging date is this year, you will have received reminders from the Pensions Regulator indicating the date. It is vital that you give some thought at least 6 months before this so that you can consider your options and take further advice if needed. Please contact us for more information if you have any concerns on this issue.
If you have any questions about payroll or would like to explore the possibility of outsourcing your payroll function to the team at CB Reid, please contact us and we will be able to discuss your exact requirements.
DISCLAIMER: This information is for guidance only, and professional advice should be obtained before acting on any information contained herein. We will not accept any responsibility for loss to any person as a result of action taken or refrained from in consequence of the contents of this publication.