Spring Payroll Update 1

Hello & Welcome

Spring Payroll Update

Presenter: Linda Pullan

Head of Payroll Alliance

Payroll Alliance www.payrollalliance.com

Payroll Alliance 3 February 2016

Graduate & Corporate

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Gold Technical helpdesk Pay & Benefits magazine Working Meetings Key series Payroll Fact File NIC Handbook Pay & Benefits Manual 10% discount on qualifications 15% discount on training 20% discount on recruitment

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Key series Payroll Fact File NIC Handbook Pay & Benefits Manual

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Key series Payroll Fact File NIC Handbook Pay & Benefits Manual

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£1050

We answer the phone quicker

than HMRC!

This Afternoon’s Programme

• Tax rates and allowances • NICs new rates and table letters • Statutory Payments • NMW & NLW • Student Loans • RTI • Auto enrolment

Spring Payroll Update 4

INCOME TAX

Personal allowances Tax Rates & Thresholds Transferable Allowances New Suffix Codes Form P45 Scottish Tax (SRIT)

Spring Payroll Update 5

Personal Allowances 2016/17

Personal Allowance £11,000 Income Limit for Personal Allowance £100,000 Married Couples Allowance Maximum amount £8,355 Minimum amount £3,220 Blind Person’s Allowance £2,290

Spring Payroll Update 6

Spring Payroll Update 7

PAYE

• Emergency tax code 1100L operated cumulatively or on a week 1 / month 1

• PAYE Threshold £212 p.w. £917 p.m.

• Age related allowances ends for those born after 5 April 1938

• Suffix ‘Y’ tax codes no longer in use from April 2016

Tax Rates & Thresholds 2015/16 2016/17

• 20% • £0 - £31,785

Basic Rate

• 40% • £31,786 - £150,000

Higher Rate

• 45% • Over £150,000

Additional Rate

Spring Payroll Update 8

• 20% • £0 - £32,000

Basic Rate

• 40% • £32,001- £150,000

Higher Rate

• 45% • Over £150,000

Additional Rate

Transferable Allowances • Unused allowance transferred

• Married couples and civil partners • Both must be basic rate taxpayers • Up to 10% of Personal allowance (£1,100) • Reduces tax up to £220 per year

• Digital applications online through GOV.UK

• Suffix letters • ‘N’ for the transferor (990N) • ‘M’ for recipient (1210M)

• Uplifts part of P9X

Spring Payroll Update 9

Future of the P45? • HMRC confirm layout to remain unchanged

• Considering how process can be improved

• Stocks of paper forms still valid

• Employers can provide form electronically

Spring Payroll Update 10

Scottish Rate of Income Tax

Spring Payroll Update 11

Scottish Tax • Scottish tax rates from 6 April 2016 (SRIT)

• Replaces Scottish Variable Rate (SVR)

• Administered by HMRC

• Applies to ‘Scottish taxpayers’

• SRIT calculated by reducing rates by 10p • Basic rate – 10p • Higher rate – 30p • Additional rate – 35p

• Scottish Parliament - Power to set higher or lower rates than rest of UK (rUK)

Spring Payroll Update 12

SRIT • 16 December 2015 - Scottish Parliament announce SRIT

• 2016/17 SRIT rate = 10%

Spring Payroll Update 13

Taxable Income rUK rate SRIT rate

Basic Rate £0 - £32,000 20% 10%(rUK) + 10%(SRIT)

Higher rate £32,001 - £150,000 40% 30%(rUK) + 10%(SRIT)

Additional Rate Over £150,001 45% 35%(rUK) + 10%(SRIT)

Definition • Where you live, Not…where you work

• Resident in UK for tax and….

• Main place of residence in Scotland for majority of tax year

• Or… if they cannot identify a main place

• Spends more days in Scotland than rest of the UK

• Or …is a Scottish Parliamentarian

Spring Payroll Update 14

What does this all mean? • HMRC began contacting 2.2m ‘Scottish’ taxpayers in December 2015

• Where tax records show residence in Scotland

• Employee should contact HMRC if they disagree

• Employers will receive P9 changes indicating ‘S’ tax codes (S1100L)

Spring Payroll Update 15

What does this all mean? • No Scottish emergency code or NT

• New starters assigned ‘S’ codes after 1st FPS

• Use all the following without change • P45s • W1/M1 codes • Regulatory Limit • Deduction for payments to sub-contractors

Spring Payroll Update 16

SRIT Payers • Scottish Government asked

SRIT to be shown separately on P60s

• HMRC stated no requirement to show SRIT separately

• SRIT to be shown separately on individual tax summaries (Personal Tax Statements)

• Scotland Bill 2015 provides Scottish Parliament with total authority in setting rates and thresholds

• May come into effect from 6 April 2017

Spring Payroll Update 17

NATIONAL INSURANCE Thresholds & Rates

Ending of Contracting-Out

Under 21s NIC

Apprentices NIC

Employment Allowance

Recording NIC earnings

Spring Payroll Update 18

NIC Thresholds and Limits 2016/17

LEL PT ST UEL/UST/ AUST

Weekly 112.00 155.00 156.00 827.00

2 weekly 224.00 310.00 312.00 1,654.00

4 weekly 448.00 620.00 624.00 3,308.00

Monthly 486.00 672.00 676.00 3,583.00

Annual 5,824.00 8,060.00 8,112.00 43,000.00

Spring Payroll Update 19

National Insurance • Upper Accrual Point (UAP)

no longer applies from 6 April 2016

• Apprentices Upper Secondary Threshold (AUST)

• NIC Categories 2016/17 – A, B, C (Not Contracted Out) – H (apprentices under 25) – J (Deferment) – M (Under 21s Standard Rate) – Z (Under 21s Deferment)

• No change to percentage rates

Spring Payroll Update 20

The End of an Era!! • Contracting-Out of S2P ends 5 April 2016

• From 6 April 2016 ALL employees will be …….. Not Contracted-Out?

• State pension changes to single-tier

• NI Rebates 1.4% & 3.4% removed

• UAP no longer required

Spring Payroll Update 21

Do your employees fully understand the effects? Do You?

Employer NICs for Under 21s • Employee aged 16 or over & under 21

• No Employer Class 1 NICs up to UST

• UST same as UEL for 2016/17

• UST could change in future tax years

• Date of payment determines NIC

Spring Payroll Update 22

Apprentices Under 25 • 0% Employer NICs up to AUST

• Legislative power to alter age

• Definition of apprentice s.9B of SSCBA 1992

• Agreement between apprentice, employer and training provider

• Apprentice levy due April 2017 – 0.5% of wage bill – On earnings above £3M – Paid through PAYE

Spring Payroll Update 23

Recording NI Earnings • Abolishment of Contracted-Out

• 3 NI earnings bands – > LEL – LEL – PT – PT – UEL

• No reporting of SCON & ECON

• The cost of abolishing C/Out

Spring Payroll Update 24

Employment Allowance • From 6th April 2016

• Increases from £2k to £3K

• Can be claimed up to 4yrs after end of tax year

• Exemption extended to sole director employee businesses

www.gov.uk/claim-employment-allowance

Spring Payroll Update 25

STATUTORY PAYMENTS

SSP

SMP

SAP SPP

ShPP

Spring Payroll Update 26

No Rate Changes for 2016/17

MINIMUM WAGE

NMW rates NMW Penalties National Living Wage

Spring Payroll Update 27

National Minimum Wage

Spring Payroll Update 28

Age From 1st Oct 2014 From 1st Oct 2015 16 to 17 years old £3.79 £3.87 18 to 20 years old £5.13 £5.30 21 years and over (adult rate)

£6.50 £6.70

Apprentice rate £2.73 £3.30 Accommodation Offset (daily rate)

£5.08 £5.35

National Living Wage (NLW) • From 1st April 2016

• NLW payable to all workers aged 25 and over

• NLW rate £7.20 per hour

• Employers should prepare: – Know who it applies to – Amend rates of pay – Communicate to workers

• NLW will be enforced!

Spring Payroll Update 29

STUDENT LOANS New type of loan

Deductions

Starters & leavers

Which one to apply

Spring Payroll Update 30

New Student Loan Deduction • New Plan Type 2 loan from 6 April 2016

– England and Wales only

• Plan Type 1 loans – Taken out before Sept 2012

• Plan Type 2 loans – Taken out during or after Sept 2012

• Start Notices (SL1) will indicate plan type

• Only Plan 1 or 2 to be operated at any one time

• New Student Loan Tables

• Students ceasing education between Sept 2012 - April 2016…dealt with SLC directly

Spring Payroll Update 31

Thresholds 2016/17 Plan Type 1

Threshold

Weekly £336.44

2 Weekly £672.88

4 Weekly £1,345.76

Monthly £1,457.92

Annual £17,495

Plan Type 2 Threshold

Weekly £403.84

2 Weekly £807.68

4 Weekly £1,615.36

Monthly £1,750.00

Annual £21,000

Spring Payroll Update 32

Deduction = 9% above thresholds

Plan Type 1 Threshold will continue to increase in line with RPI

Plan Type 2 Threshold frozen until April 2021

No change to RTI reporting requirements

Knowing Which Plan Type to Operate • Starters

– Ask employee which plan – New starters checklist from 6 April – No change to P45 – Use Plan Type 1 as default – Employee should contact SLC

• Leavers – P45 - Item Box 5 – Enter ‘Y’

• Which deduction to apply? – Employee could have both – Only operate one deduction type – Could receive new SL1 – changing plan type

Spring Payroll Update 33

Auto-Enrolment Thresholds 2016/17

Weekly 2 Weekly 4 weekly Monthly Annual

Earnings Trigger

£192 £384 £768 £833 £10,000

Lower level of qualifying earnings

£112 £224 £448 £486 £5,824

Upper level of qualifying earnings

£827 £1,654 £3,308 £3,583 £43,000

Spring Payroll Update 34

Auto-Enrolment Simplification Technical changes since April 2015 Exceptions

– Reduce assessment of all categories – Facilitate one individual communication – Reduce information requirements

• Tax Protected Status

• Auto Re-Enrolment

– Every 2 years 9 months

Spring Payroll Update 35

Spring Payroll Update 36

REAL TIME INFORMATION

Reporting Relaxation

RTI Relaxation • 9 or fewer employees

• Report on or before

last payday in month

• Relaxation ends 5 April 2016

Spring Payroll Update 37

Any questions?

Linda Pullan linda.pullan@lexisnexis.co.uk

www.payrollalliance.com

Payroll Alliance 3 February 2016