The beginning of the new tax year is fast approaching and with it comes a host of changes. Some of these changes are normal increases to National/Living Wage and Personal Allowance Thresholds but others relate to less common changes including new payslip requirements for workers with irregular time sheet patterns.
Minimum Wage and Personal Allowance Increases
Let’s start with probably the most important increase for both employers and employees alike, relating to statutory minimum wage rates for workers of all ages.
The highest increase is the Living Wage rise for over 25’s, which comes in at a hike of 38p per hour at £8.21. Increases are also in place for 21-24 year olds up 32p at £7.70, 18-20 year olds at £6.15, 16-17 year olds at £4.35 and for apprentices under 19 or in the first year of their apprenticeship, up 20p per hour to £3.90.
| Year | 25 and over | 21 to 24 | 18 to 20 | Under 18 | Apprentice |
|---|---|---|---|---|---|
| April 2018 (current rate) | £7.83 | £7.38 | £5.90 | £4.20 | £3.70 |
| April 2019 | £8.21 | £7.70 | £6.15 | £4.35 | £3.90 |
Another important increase relates to the Personal Tax Threshold, the amount employees can earn each year before income tax becomes payable. This rate has risen from £11,850 in 18/19 to £12,500 in 19/20, meaning an extra £54 of tax free income for employees each month. For employers with Scottish or Welsh resident employees, don’t forget to check the applicable tax band as the England and Northern Ireland thresholds do not apply, and with Scotland having six tax bands, it’s even more important to understand the allowances available to all employees.
England and Northern Ireland
| PAYE tax rates and thresholds | 2019 to 2020 |
|---|---|
| Employee personal allowance | £240 per week £1,042 per month £12,500 per year |
| English and Northern Irish basic tax rate | 20% on annual earnings above the PAYE tax threshold and up to £37,500 |
| English and Northern Irish higher tax rate | 40% on annual earnings from £37,501 to £150,000 |
| English and Northern Irish additional tax rate | 45% on annual earnings above £150,000 |
National Insurance and Statutory Payments
Moving on to National Insurance Contributions (NIC), there are small increases here to all bands with the threshold in which employees start paying NI rising by £2 to £188 per week, whilst for employers this rises by £4 to £166 per week.
Class 1A NI rates stay the same on Benefit in Kind (BIK) arrangements at 13.8%, as does Class 1B PAYE Settlement Agreements rates. Statutory payments also increase by £3.50 across the board to £148.68 or 90% of the employee’s average weekly earnings.
| Class 1 National Insurance thresholds | 2019 to 2020 |
|---|---|
| LEL | £118 per week £512 per month £6,136 per year |
| Primary Threshold (PT) | £166 per week £719 per month £8,632 per year |
| Secondary Threshold (ST) | £166 per week £719 per month £8,632 per year |
| Upper Secondary Threshold (under 21) (UST) | £962 per week £4,167 per month £50,000 per year |
| Apprentice Upper Secondary Threshold (apprentice under 25) (AUST) | £962 per week £4,167 per month £50,000 per year |
| Upper Earnings Limit (UEL) | £962 per week £4,167 per month £50,000 per year |
Statutory Payment Rates
| Type of payment or recovery | 2019 to 2020 rate |
|---|---|
| SMP – weekly rate for first 6 weeks | 90% of the employee’s average weekly earnings |
| SMP – weekly rate for remaining weeks | £148.68 or 90% of the employee’s average weekly earnings, whichever is lower |
| Statutory Paternity Pay (SPP) – weekly rate | £148.68 or 90% of the employee’s average weekly earnings, whichever is lower |
| Statutory Adoption Pay (SAP) – weekly rate for first 6 weeks | 90% of employee’s average weekly earnings |
| SAP – weekly rate for remaining weeks | £148.68 or 90% of the employee’s average weekly earnings, whichever is lower |
| Statutory Shared Parental Pay (ShPP)– weekly rate | £148.68 or 90% of the employee’s average weekly earnings, whichever is lower |
| SMP/SPP/ShPP/SAP – proportion of your payments you can recover from HMRC | 92% if your total Class 1 National Insurance (both employee and employer contributions) is above £45,000 for the previous tax year
103% if your total Class 1 National Insurance for the previous tax year is £45,000 or lower |
Statutory Sick Pay (SSP)
| Unrounded daily rates | Number of QDs in week | 1 day to pay | 2 days to pay | 3 days to pay | 4 days to pay | 5 days to pay | 6 days to pay | 7 days to pay |
|---|---|---|---|---|---|---|---|---|
| £13.4642 | 7 | £13.47 | £26.93 | £40.40 | £53.86 | £67.33 | £80.79 | £94.25 |
| £15.7083 | 6 | £15.71 | £31.42 | £47.13 | £62.84 | £78.55 | £94.25 | |
| £18.8500 | 5 | £18.85 | £37.70 | £56.55 | £75.40 | £94.25 | ||
| £23.5625 | 4 | £23.57 | £47.13 | £70.69 | £94.25 | |||
| £31.4166 | 3 | £31.42 | £62.84 | £94.25 | ||||
| £47.1250 | 2 | £47.13 | £94.25 | |||||
| £94.25 | 1 | £94.25 |
Student Loan Repayments
Whilst Student Loan repayments have been a part of the payroll scene for some years, April 2019 sees the implementation of deductions relating to Postgraduate Loans. For those former students earning over £21,000 a year, 6% will be deducted from employees pay, this is in addition to any undergraduate loan repayments. This new requirement could potentially result in employees facing a 15% deduction from any monthly pay, which is over and above the set thresholds and subject to relevant regulatory limits. Employers are likely to receive notifications from HMRC in the coming weeks and it’s also important to remember to ask new employees about any Student Loan payments as part of new starter processes.
| Rate or threshold | 2019 to 2020 rate |
|---|---|
| Employee earnings threshold for Student loan Plan 1 | £18,935 per year £1,577.91 per month £364.13 per week |
| Employee earnings threshold for Student loan Plan 2 | £25,725 per year £2,143.75 per month £494.71 per week |
| Student loan deductions | 9% |
| Employee earnings threshold for Postgraduate loan | £21,000 per year £1,750.00 per month £403.84 per week |
| Postgraduate loan deductions | 6% |
Auto Enrolment Pension Schemes
In addition to the HMRC rates and threshold increases, auto enrolment pension scheme requirements will see a third and final pre-planned increase in contribution rates for both employer and employees. The rates which relate to any income including salaries, bonuses, overtime and statutory payments above the lower earnings limit (LEL) of £118 per week, will attract a minimum employee contribution of 5% and a minimum employer contribution of 3%, equating to 8% in total.
For many employers, the requirement to perform re-enrolment duties will also be on the horizon. This activity must be undertaken every three years and all current eligible employees must be re-enrolled onto a suitable pension scheme and given the opportunity to again opt-out. An employer declaration must also be completed and submitted with The Pensions Regulator (TPR) to confirm compliance. Employers can choose a three month window either side of the anniversary of the start date of auto enrolment duties. If you are unsure of when this is, you can use the handy tool over on the TPR website to check your dates using your PAYE reference number or letter code.
| Date | Employer minimum contribution | Staff contribution | Total minimum contribution |
|---|---|---|---|
| New rate: 6 April 2019 onwards | 3% | 5% | 8% |
Changes to Payslips
From 6th April 2019, all employers will also be required to comply with the Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) Order 2018 (‘Order 1’).
To simplify, this means that employees are entitled to receive a payslip that states the number of hours worked and the total pay received alongside current requirements to provide gross pay, net pay and deduction figures. Whilst we would recommend providing hourly rates and hours worked on payslips in the normal course of processing payroll, this new legislation is only applicable to those who are paid by the hour and receive varying rates of pay for different hours worked, such as overtime or weekend rates. It is always beneficial for your employees to understand the pay received against hours worked and can also be helpful in spotting any error or omissions so we very much welcome this new requirement.
Employers have two options on how this information can be displayed. It can be provided in a single figure stating hours worked and total gross pay received or it can be broken down into number of hours worked and rate of pay received per activity, any example of how this could be set out is provided below.
A further requirement under Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) Order 2018 (‘Order 2’), relates to all ‘workers’, not just those under a contract of employment, who will become eligible to receive an itemised pay statement. Definitions of workers can be defined as ‘persons with contracts for work or services’ and ‘being required to turn up to work even if they don’t want to’. Further information is available from HMRC , and you can also make use of the check employment status tool to determine the correct status of any potential or current workers.
We have listed some of the most important changes happening during 2019/2020 but there are many more coming in to place for businesses of all sizes and structures such as gender pay reporting and chief executive officer pay ratio information. Payroll is an important and ever evolving landscape of legislation and red tape and that’s why it is so important to have the support of a payroll professional in place for your small or medium size business. For help with your payroll requirements, contact Jaye who is an Associate of the Chartered Institute of Payroll Professionals (CIPP), on 01395 320316 or via info@exebookkeeping.com
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