This content is restricted to subscribers
The new tax year 2015-16
The new tax year 2015-16 is almost with us. There are a few changes for individuals and employers to be aware of.
Income tax
From 6th April 2015 the personal tax allowance will increase to £10,600 for the 2015/16 tax year. Taxpayers will pay 20% on the next £31,785 of their income, so higher rates of tax will be applied to income above £42,385.
A new married couples’ allowance is being introduced from April 2015. This means that if eligible you could transfer up to £1,060 of your allowance to your spouse or civil partner. Your partner would then save up to £212 tax during the tax year. To qualify, one spouse must have a total income no higher than £10,600, and the other must be earning between £10,601 and £42,385. One person per couple can register here https://www.gov.uk/marriage-allowance
Employer’s National Insurance
There is some good news for certain employers for the 2015/16 tax year. The NIC allowance is continuing, so employers will not need to pay the first £2,000 of the 13.8% employer’s national insurance liability. It’s a good idea to check your payroll software is set up to enable this deduction.
Also, from April 2015 employers’ NICs on payments to employees aged under 21, and apprentices under 25 will be nil, on salaries/wages up to £42,385. The normal 13.8% rate will apply to amounts in excess of that threshold.
The NIC deducted from employees is not affected by the above.
Pensions
There have been wide-ranging changes to the way people can pay into pension schemes and withdraw cash. The tax savings or consequences of your decisions could be significant, and you are strongly advised to seek advice from a regulated financial advisor before making any changes, or simply to review your pension status.
Payroll reporting
Penalties for late submissions of PAYE reports (RTI / FPS / EPS reports submitted online on or before the wages/salaries payment date) are due to begin in March 2015. 3 days’ grace will be allowed for employers with fewer than 50 employees.
Penalties start at £100 per late return, further details are here https://www.gov.uk/what-happens-if-you-dont-report-payroll-information-on-time
Auto-enrolment pension schemes
Between now and 2017 employers with small numbers of employees will be contacted by the Pensions Regulator, and will need to have a compliant pension scheme for all eligible workers. Employers should ensure they understand their obligations and act in plenty of time to set up a scheme before their compulsory staging date. The staging date is the date on which employees must be enrolled and the scheme begins. Information can be found on the Pensions Regulator website, and/or from your financial advisor. http://www.thepensionsregulator.gov.uk/employers.aspx
If you would like any help with any of the above please contact us.
Minimum wage increase October 2014
The UK minimum wage increases by 19p per hour on 1st October 2014, for all workers aged 21 and over.
Rates for people under 21, and apprentices also increase by a few pence per hour.
Getting it right
| Year | 21 and over | 18 to 20 | Under 18 | Apprentice* |
|---|---|---|---|---|
| 2014 (from 1 October) | £6.50 | £5.13 | £3.79 | £2.73 |
| 2013 (current rate) | £6.31 | £5.03 | £3.72 | £2.68 |
*This rate is for apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to the National Minimum Wage for their age.
The minimum wage applies to most workers over 16 years of age, in the UK, It does not apply to self-employed people, company directors, volunteers, workers younger than school leaving age and a few others.
Making mistakes
Employers who discover they’ve paid a worker below the minimum wage must pay any arrears immediately. There will also be a penalty and offenders might be named by the government.
HM Revenue and Customs (HMRC) officers have the right to carry out checks at any time and ask to see payment records. They can also investigate employers, following a worker’s complaint to them.
Employer’s must keep records proving that they are paying the minimum wage. Most employers use their payroll records as proof. All records have to be kept for 3 years.
The minimum wage is not just for staff paid hourly. You need to make sure that salaried staff, whose pay may be calculated on a weekly, monthly or annual basis are also being paid within the minimum wage regulations.
More information can be found at www.gov.uk or you can contact us to ask a question.
Payroll changes 2014-15
Payroll changes 2014-15 are the usual updates to tax codes, tax rates and NIC rates. Good news includes a delay in the implementation of late filing penalties under the RTI system, and a £2,000 reduction to employer’s NIC. On the downside, employers will no longer be able to reclaim SSP paid to employees.
RTI LATE FILING PENALTIES
The penalties for late filing of the FPS files which were due to commence April 2014 have been postponed until October 2014.
The FPS files are the Real Time Information (RTI) reports sent each pay period and are due on or before the pay date. The fines are per late FPS and depend upon the number of staff you have:
Staff Monthly Penalty
- 1 to 9 employees £100
- 10 to 49 employees £200
- 50 to 249 employees £300
- 250 or more employees £400
The penalty notices will only be sent out quarterly ,so the bill could be quite high when you receive it. Payment is due within 30 days of the notice.
Where an FPS is late for more than 3 months and the information is not included on a later submission a further charge is made – 5% of the Tax/NICs which should have been on the submission.
SSP RECLAIM ABOLISHED
From April 2014 the reclaim of SSP will be abolished. You still need to keep a record of SSP paid in the normal way but there will be no reclaims at all. Reclaims for SMP, SPP and SAP remain the same.
TAX RATES 2014-15
The new standard tax code is 1000L
Tax Bands:
- 20% £1 to £31,865
- 40% £31,866 to £150,000
- 45% £150,001 and above
NIC Thresholds 2014-15:
Payments start from the primary threshold: weekly pay of £153, monthly £663, annual £7,956
Employees deductions are 12% on amounts above the primary threshold, up to £805 weekly/ £3,489 monthly then 2% on all other earnings
Employers liability: 13.8% on all earnings above the secondary threshold (values are the same as the primary threshold mentioned above).
The threshold for statutory payments is £111 per week.
SSP rate £87.55 per week
SMP/SPP/SAP standard rate £138.18
Student loans are recovered at 9% on earnings above: weekly £325.19 , monthly £1,409.16 or annual £16,910.00.
£2,000 NIC ALLOWANCE
HMRC are introducing a £2,000 Employers Allowance to be offset against your Employer’s NIC. Most employers are eligible for this and we will be taking it into account on your monthly PAYE Summaries.
There are a small number of employers who are not eligible and you can check your entitlement by logging on to the following website:
https://www.gov.uk/employment-allowance-up-to-2000-off-your-class-1-nics
RTI – Real Time Information
Real Time Information (RTI) has been introduced to improve the PAYE system by assisting HMRC in gathering critical data on a more frequent basis. It begins on your first pay date after 6th April 2013, so it is important to act very soon to ensure you can meet the requirements.
This change applies to your business if you have any employees, including those paid below the tax/NIC threshold, those paid just once a year, casual and temporary workers (unless they are paid by an agency). The main changes being implemented are:
- Reporting to HMRC: currently your payroll data is reported to HMRC annually on the Employer’s End of Year Return (P35). The 2012/13 tax year is the last time this will be done. From 6th April 2013, employers will report their payroll data to HMRC every time they pay employees,
- Employees paid below the tax/NIC threshold must now be added to your PAYE scheme,
- It will no longer be necessary to file P46 and P45 starter and leaver forms: however, new starter information is still needed, and the employee must still be provided with a P45 when he/she leaves.
One of the first things you need to do to, before you even begin to consider the impact of RTI on your business, is talk to your existing software provider. It is important that you find out whether or not your software is currently RTI compliant or will be compliant before April 2013. This is when most employers will start operating the new PAYE process.
Collins Accountancy Ltd uses fully compliant software and provides a full payroll service. If you prefer to process payroll in-house please ask for software recommendations, some options are free.
RTI and payroll
The biggest exercise you may need to do is the data cleansing process and what HMRC refers to as ‘payroll alignment‘.
To minimise rejection due to a mismatch with HMRC records, it is important that the payroll records are reviewed for any missing and incorrect compulsory data. Where this data is not available, it must be obtained from the employee. The next step would be to transfer the amendments onto your computer system using your payroll software.
Using Collins Accountancy Ltd as your RTI provider
The introduction of RTI needs to be properly managed. It is important to know that:
- once the return has been filed there can be no more changes to the pay run,
- All of the data needed for new starters must be obtained on a timely basis or the new starter may not get paid (in practice this may put you in a difficult position as you may have a legal and contractual duty to pay your employees).
Get help and advice with RTI
For information on Real Time Information visit the HMRC website and select the link which states ‘I confirm that I want to view guidance on operating PAYE in real time’. HMRC publications, such as the Employer Bulletin are usually worth reading too.
If we can help with any of the above please contact us.
RTI, pension auto-enrolment and minimum wage 2012
RTI. Auto-enrolment to pension schemes. An increase to the minimum wage.
There have been a few changes in the news recently. The important ones for employers are the changes to national minimum wage, the introduction of RTI reporting, and the introduction of automatic enrollment of workers to pension schemes.
National Minimum Wage
From 1st October 2012 the minimum wage rates are:
- £6.19 an hour for workers aged 21 and over (an increase of 11p)
- £4.98 an hour for workers aged 18-20
- £3.68 an hour for workers aged below 18 who are no longer of compulsory school age
- £2.65 per hour for apprentices under 19, and 19 or over in their first year of apprenticeship
Payroll changes – RTI
HM Revenue and Customs (HMRC) is changing the way employers report tax and national insurance (NIC) liability. Currently, you (or your payroll provider), calculate tax and NIC on a regular basis. You pay your employees their net wage or salary. You then pay the tax and NIC to HMRC monthly or quarterly. At the end of the tax year, a P35 report is filed with HMRC. The P35 confirms the amounts of tax each employee has paid, and the total tax and NIC deducted and paid to HMRC by the employer.
Under the new system – RTI (real time information) employers send a report to HMRC when every payroll run is completed. Each report will contain employees’ personal and payment details. So there will no longer be a year-end return to file. HMRC will no longer require P46s and P45s to be filed, but you will still need the same information from starters and must give P45 information to leavers.
To prepare for the change you’ll need to make sure your software can file RTI reports, and check that all of your employee details are accurate. If you use a payroll provider, or bureau, they should handle the change for you.
The payroll software that we use is fully compliant with the new regime, so clients can expect to see little difference in the work they need to do.
More information is on HM Revenue and Customs website, or please contact us for help with your payroll.
Pension Auto-enrolment
The introduction of compulsory pension schemes for jobholders has been in the news recently. Currently only large companies must make sure all eligible workers are enrolled onto a qualifying pension scheme. It will be extended to all employers by 2017.
Employers will have to deduct a proportion of the jobholder’s pay, and make an additional employer contribution.
The dates from which employers must start (the staging date), depend on the number of employees you have and your PAYE reference. More information what you need to do, when you’ll need to do it, and what you must not do, can be found on the Pensions Regulator website:
When the time comes to set up your scheme, please talk to an independent financial advisor to find the most cost effective scheme for you and your workers. If you would like help in finding a good financial advisor please contact us.