Payroll Update Spring 2020

Payroll Update DRIVING LIFELONG PROSPERITY

Spring 2017 2020

WHAT IS NEW IN PAYROLL FOR 2020/21 NATIONAL MINIMUM WAGE (NMW) AND NATIONAL LIVING WAGE (NLW)

TAX ALLOWANCES 2019/20

The NMW/NLW will increases from April 2020 to the following rates:

Category

From From April 2020 April 2019

NLW workers aged 25 and over

£8.72

£8.21

NMW workers aged 21 to 24

£4.55

£7.70

NMW workers aged 18 to 20

£6.45

£6.15

NMW workers aged 16 to 17

£8.20

Apprentice*

£4.15

The personal allowance of £12,500 remains in place for the 2020/21 tax year and will rise in line with CPI after that.

Tax rates (rUK and Wales) 20% basic rate 40 % higher rate

2020/21 Taxable income

2019/20 Taxable income

Up to £37,500

Up to £37,500

£37,501 - £150,000 £37,501 - £150,000

45% additional rate

Over £150,000

Over £150,000

£4.35

Scottish tax rates (SRIT)

2020/21 Taxable income

2019/20 Taxable income

£3.90

19% starter rate

Up to £2,085

Up to £2,049

£2,086 - £12,658

£2,050 - £12,444

21% intermediate rate £12,659 - £30,930

£12,445 - £30,930

20% basic rate * Apprentices age 16 to 18 and those aged 19 or over and in the first year of apprenticeship.

41% higher rate 46% top rate

£30,931 - £150,000 £30,931 - £150,000 Over £150,000

Over £150,000

For a full breakdown of the new allowances and rates, please refer to our Payroll Facts 2020/2021 booklet.

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CHILDCARE VOUCHERS Employer supported childcare schemes such as salary sacrifice schemes for childcare vouchers closed to new entrants in October 2018. Employees who are already in a scheme are able to continue, as long as they remain eligible, do not leave the scheme and remain with their current employer.

The charge is 0.5% of the NI pay and there is a £15,000 allowance – meaning you do not pay the levy on the first £3 million of the pay bill.

This allowance is the total for a group but can be shared (in whatever proportion you choose) across the companies.

COMPANY CARS – LOW EMISSION VEHICLES

Employers should remember to complete their basic earnings assessment each April for employees continuing in the childcare vouchers scheme. For more information visit https://www.gov.uk/ government/publications/employer-supported-childcare

There are 11 new bands being introduced from April 2020 for low emission vehicles. You will also need to report the zero emission mileage either on the P11d or through the payroll, if you payroll car benefits. There is also a change for diesel cars which meet the Euro 6D standard – these are now exempt from the diesel supplement charge.

EMPLOYER NATIONAL INSURANCE ON TERMINATION PAYMENTS AND SPORTING TESTIMONIAL PAYMENTS

STATUTORY BEREAVEMENT LEAVE

From April 2020, termination payments in excess of £30,000 and sporting testimonial payments over £100,000 will be subject to 13.8% Class 1A employer national insurance contributions, which will be payable and reportable in line with usual PAYE deadlines – i.e. paid by 22nd of the following month. These elements are already subject to income tax following the tightening of the rules in April 2018.

EMPLOYMENT ALLOWANCE ELIGIBILITY CHANGES The new restriction limits the eligibility of those who can claim to those with an Employer’s NI bill of less than £100,000 in the previous tax year. Any organisation which is part of a group must measure the £100,000 against the total Employer’s NI across the group.

If you have more than one employer PAYE reference, you can only claim employment allowance against one of them.

If you’re part of a group, only one company or charity in the group can claim the allowance.

Employment allowance from April 2020 will be classed as State Aid. Employers will need to ensure that they have space to accommodate the full £4,000* within their relevant three-year ceiling, otherwise it can’t be claimed.

You cannot claim if: > You are the director and the only employee paid above the

secondary threshold > you employ someone for personal, household or domestic work (like

a nanny or gardener) - unless they are a care or support worker > you are a public body or business doing more than half your work in

the public sector (such as local councils and NHS services) - unless you are a charity > you are a service company working under ‘IR35 rules’ and your only

income is the earnings of the intermediary (such as your personal service company, limited company or partnership) For our payroll clients we will apply the employment allowances based on the information we hold. If your company is part of a group and we do not administer all the payrolls, or you are concerned that you may exceed your State Aid threshold, please contact us.

From April 2020, statutory bereavement leave will provide at least two weeks’ leave for employees following the loss of a child under the age of 18 or a stillbirth after 24 weeks of pregnancy. Employees with 26 weeks’ continuous service and average earnings over £120 a week, will be entitled to paid leave at the statutory rate of £151.20 or 90% of earnings if lower. Other employees will be entitled to unpaid leave.

OFF-PAYROLL WORKERS (IR35) The Government has announced that the changes due to take effect for contractors in the private sector from 6 April 2020, will now be delayed until April 2021..

PAYROLLING BENEFITS IN KIND You may remember from a previous Payroll Update, that you are able to payroll most benefits in kind. The only benefits that can’t be payrolled are living accommodation and interest free and low interest loans.

By payrolling the cash equivalent of the benefit, any tax due is deducted at source. This means that employee pays the tax straight away, rather than delayed to the following tax year through their tax code.

If you choose to payroll company car benefits, you will no longer need to submit a P46(car) because this information is sent electronically to HMRC. Any benefits that have been payrolled will not have to be reported on a P11D form.

Payroll benefits and expenses will still have to be entered on the P11D(b) in order to pay the Employer’s Class 1A NI. In order to use this service for the 2020/21, employers must register online by 5 April 2020.

CHANGES TO HOLIDAY PAY The holiday pay reference period for workers with variable hours increases from April from 12 weeks to 52 weeks. This means that employers will need to look back over the past 52 weeks, discarding any weeks that a worker did not earn, to calculate their average weekly pay up to a maximum of 104 weeks.

APPRENTICESHIP LEVY The apprenticeship levy was introduced from April 2017 and is payable by all employers with an annual pay bill of more than £3 million. If an employer is part of a group (defined in the same way as for employment allowance), then the £3 million test is against the total pay bill for the group.

CHERYL BAKER Payroll Solutions Associate Director 01242 680000 payrollsupport@hazlewoods.co.uk

Staverton Court, Staverton, Cheltenham, GL51 0UX Tel. 01242 680000 www.hazlewoods.co.uk / @Hazlewoods This newsletter has been prepared as a guide to topics of current financial business interests. We strongly recommend you take professional advice before making decisions on matters discussed here. No responsibility for any loss to any person acting as a result of the material can be accepted by us. Hazlewoods LLP is a Limited Liability Partnership registered in England and Wales with number OC311817. Registered office: Staverton Court, Staverton, Cheltenham, Gloucestershire, GL51 0UX. A list of LLP partners is available for inspection at each office. Hazlewoods LLP is registered to carry on audit work in the UK and regulated for a range of investment business activities by the Institute of Chartered Accountants in England & Wales.