What's changing, what's not, and what's new?
***Important - All clients must read and complete the form below***
With the late budget and special COVID-19 changes, this update has been a long time coming, but it's finally here!
Please read ALL of the below changes and then submit your Employment Allowance eligibility and any year end requests on this form: https://paycheckuk.wufoo.com/forms/year-end-request-form-april-2020/
If we do not receive a form back from you, will assume that you are not eligible for the employment allowance, until we hear otherwise.
At Pay Check we will always strive to keep our clients informed on all changes to payroll legislation. Below you will find a comprehensive round up of the changes ahead, summarised in a handy guide.
In these unprecedented circumstances legislation is changing week by week - we'll be coming back to update anything as it happens and inform you via email if there is a change to review.
If you have any queries on the information on this page, use the contact us button at the bottom of the page and speak to your account manager for more guidance.
The Employment Allowance will increase to £4000 for qualifying employers.
The eligibility criteria to claim the allowance has changed; only those businesses whose Employer National Insurance Contributions liability in the 1920 tax year was less than £100,000 will qualify for the allowance in 2021.
From April 2020 you’ll need to make extra checks to find out if you’re eligible to claim EA. This includes checking de minimis state aid.
Most businesses will not have received de minimis state aid before so will not need to do further checks to check if they are eligible for the EA.
We’ll continue to claim EA through your Employer Payment Summary (EPS), but claims will not renew and you’ll need to make a new claim for EA each year - please inform us on the form at the bottom of this page.
The new eligibility criteria seems complex but HMRC break down the checks you need to make here.
You can submit your eligibility and any other year end requests here
https://paycheckuk.wufoo.com/forms/year-end-request-form-april-2020/
SSP has increased to £95.85 per week. The threshold to qualify for SSP has increased to £120 per week.
The government will bring forward legislation to allow small- and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. The eligibility criteria for the scheme will be as follows:
- this refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19
- employers with fewer than 250 employees will be eligible - the size of an employer will be determined by the number of people they employed as of 28 February 2020
- employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
- employers should maintain records of staff absences, but employees will not need to provide a GP fit note
- eligible period for the scheme will commence the day after the regulations on the extension of Statutory Sick Pay to self-isolators comes into force
It's important to remember the following:
- SSP relating to COVID-19 sickness or self-isolation can start from day 1, but this is not the case for other sickness
- Further to this, whilst it is still slightly unclear when it will happen, the HMRC will only refund the 2 weeks SSP per employee for a specifically COVID-19 related illness or self isolation
- HMRC have confirmed that employees do not need to give you a GP note for this period, they can self certify, therefore we strongly advise that employers keep their own detailed records of the types of sickness your employees are paid SSP for, as the government may ask to see these for a future reclaim
- The government has commented that payroll software have not been updated for the reclaims - rest assured that Pay Check are ready to make the payments, and are working with our software providers to implement updates for the reclaim as soon as the government releases more information.
This initiative will provide 2 million employers with up to £2 billion to cover the costs of large-scale sick leave.
More information about this and regular updates can be found on GOV.UK.
The threshold to qualify for all statutory payments has increased to £120.
The first six weeks of maternity pay remains at 90% of an employee’s average weekly earnings. The rate for the next 33 weeks increases to £151.20 a week.
If an employee’s average weekly earnings are lower than the statutory amount they will receive the lower amount for 39 weeks.
There is no change to the amount of SMP/SPP that can be reclaimed. This remains at 92% unless you qualify for Small Employers Relief.
Small Employers Relief remains unchanged at 103%. The threshold for Small Employer relief remains unchanged at £45,000 - this means you must have paid less than this amount in NICs in the previous tax year to qualify for Small Employers Relief.
Paternity and Adoption pay increases to £151.20 per week or 90% of average weekly earnings if less.
Shared Parental Pay increases to £151.20 per week or 90% of the employee’s average weekly earnings if this is lower. Parents will be able to share up to 50 weeks leave of which 37 weeks are paid at £151.20.
There is a new statutory payment from this year called Statutory Parental Bereavement Pay (SPBP), the rate of which is £151.20 per week or 90% of the employee's average weekly earnings if this is lower.
From 6 April 2020, employees and workers will have the right to 2 weeks' parental bereavement pay if:
- their child dies under the age of 18
- they've worked for their employer for at least 26 weeks
- they earn on average at least £120 per week (before tax)
Read about the new right to parental bereavement leave and pay on GOV.UK.
If someone has a stillbirth after 24 weeks of pregnancy, they can get up to 52 weeks of statutory maternity leave or pay.
A miscarriage or stillbirth can be traumatic regardless of the stage of pregnancy.
So employers should also consider:
- what's best for the person or their partner, depending on their specific circumstances and needs
- offering them time off if the miscarriage happened before 24 weeks of pregnancy
The annual personal allowance remains at £12,500. This gives a monthly tax-free amount of £1,041.67.
Regular Tax code for 2020/21 is 1250L
The UK tax bands for 2020/21 are as follows:
England and Northern Ireland
| PAYE tax rates and thresholds | 2020 to 2021 |
|---|---|
| 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 |
Scottish Income Tax is different to the rest of the UK. The Scottish rates have been set as follows:
Scotland
| PAYE tax rates and thresholds | 2020 to 2021 |
|---|---|
| Employee personal allowance | £240 per week £1,042 per month £12,500 per year |
| Scottish starter tax rate | 19% on annual earnings above the PAYE tax threshold and up to £2,049 |
| Scottish basic tax rate | 20% on annual earnings from £2,050 to £12,444 |
| Scottish intermediate tax rate | 21% on annual earnings from £12,445 to £30,930 |
| Scottish higher tax rate | 41% on annual earnings from £30,931 to £150,000 |
| Scottish top tax rate | 46% on annual earnings above £150,000 |
Welsh Income Tax has the right to differ to the rest of the UK, however this year they remain the same as England and Northern Ireland:
Wales
| PAYE tax rates and thresholds | 2020 to 2021 |
|---|---|
| Employee personal allowance | £240 per week £1,042 per month £12,500 per year |
| Welsh basic tax rate | 20% on annual earnings above the PAYE tax threshold and up to £37,500 |
| Welsh higher tax rate | 40% on annual earnings from £37,501 to £150,000 |
| Welsh additional tax rate | 45% on annual earnings above £150,000 |
Emergency tax codes
The emergency tax codes from 6 April 2020 are:
- 1250L W1
- 1250L M1
- 1250L X
Find out more about emergency tax codes.
The threshold before deductions for Plan 1 student loans increases from £18,935.00 to £19,390.00 per year (£1615.83 per month). The repayment rate remains at 9%.
The threshold for deductions for Plan 2 student loans increases from £25,725.00 to £26,575.00 (£2214.58 per month). The repayment rate remains unchanged at 9%.
The threshold for deductions for the Postgraduate Loan Deduction remains at £21,000.00 (£1750.00 per month). The repayment rate remains unchanged at 6%.
For further information please visit: https://www.gov.uk/repaying-your-student-loan/overview
The weekly National Insurance (NI) lower earnings limits differ between Employee and Employer this year - this is the weekly earnings limit before an employee and employer pays NI contributions. For Employees this has increased to £183.00 and for Employers £169.00.
The the upper earnings limit remains at £50,000.00. In fact all National Insurance rates remain the same too, and are listed in the tables below:
Employee (primary) contribution rates
Deduct primary contributions (employee’s National Insurance) from your employees’ pay through PAYE.
| National Insurance category letter | Earnings at or above lower earnings limit up to and including primary threshold | Earnings above the primary threshold up to and including upper earnings limit | Balance of earnings above upper earnings limit |
|---|---|---|---|
| A | 0% | 12% | 2% |
| B | 0% | 5.85% | 2% |
| C | nil | nil | nil |
| H (apprentice under 25) | 0% | 12% | 2% |
| J | 0% | 2% | 2% |
| M (under 21) | 0% | 12% | 2% |
| Z (under 21 – deferment) | 0% | 2% | 2% |
Employer (secondary) contribution rates
You pay secondary contributions (employer’s National Insurance) to HMRC as part of your PAYE bill.
Pay employers’ PAYE tax and National Insurance.
| National Insurance category letter | Earnings at or above lower earnings limit up to and including secondary threshold | Earnings above secondary threshold up to and including upper earnings limit, upper secondary threshold, apprentice upper secondary threshold | Balance of earnings above upper earnings limit, upper secondary threshold, apprentice upper secondary threshold |
|---|---|---|---|
| A | 0% | 13.80% | 13.80% |
| B | 0% | 13.80% | 13.80% |
| C | 0% | 13.80% | 13.80% |
| H (apprentice under 25) | 0% | 0% | 13.80% |
| J | 0% | 13.80% | 13.80% |
| M (under 21) | 0% | 0% | 13.80% |
| Z (under 21 – deferment) | 0% | 0% | 13.80% |
Class 1 National Insurance thresholds
You can only make National Insurance deductions on earnings above the Lower Earnings Limit (LEL).
| Class 1 National Insurance thresholds | 2020 to 2021 |
|---|---|
| Lower earnings limit | £120 per week £520 per month £6,240 per year |
| Primary threshold | £183 per week £792 per month £9,500 per year |
| Secondary threshold | £169 per week £732 per month £8,788 per year |
| Upper secondary threshold (under 21) | £962 per week £4,167 per month £50,000 per year |
| Apprentice upper secondary threshold (apprentice under 25) | £962 per week £4,167 per month £50,000 per year |
| Upper earnings limit | £962 per week £4,167 per month £50,000 per year |
Class 1A National Insurance contributions are due on the amount of termination awards paid to employees which exceed £30,000 and on the amount of sporting testimonial payments paid by independent committees which exceed £100,000. You will need to tell us in your payroll submission if an amount relates to a termination award or sporting testimonial, then we will apply the correct calculations and submit to HMRC through the FPS file.
| National Insurance class | 2020 to 2021 rate |
|---|---|
| Class 1A | 13.8% |
National Minimum Wage
The National Minimum Wage is the minimum pay per hour almost all workers are entitled to by law. Use the National Minimum Wage calculator to check if you’re paying a worker the National Minimum Wage or if you owe them payments from past years.
These rates apply from 1 April 2020.
| Category of worker | Hourly rate |
|---|---|
| Aged 25 and above (national living wage rate) | £8.72 |
| Aged 21 to 24 inclusive | £8.20 |
| Aged 18 to 20 inclusive | £6.45 |
| Aged under 18 (but above compulsory school leaving age) | £4.55 |
| Apprentices aged under 19 | £4.15 |
| Apprentices aged 19 and over, but in the first year of their apprenticeship | £4.15 |
We ask clients to inform Pay Check of any salary changes as for audit purposes we do not automatically change pay rates on the 1St April 2020. If you would like a report detailing employees pay rates and age, please contact your account manager to have this sent through in the March payroll.
The Apprenticeship Levy allowance remains at £15,000. There are no changes to the eligibility criteria for the calculation of the levy.
These are based on an employee’s age and length of employment and are counted back from the date of dismissal.
Employees get:
- 1.5 weeks’ pay for each full year of employment after their 41st birthday
- a week’s pay for each full year of employment after their 22nd birthday
- half a week’s pay for each full year of employment up to their 22nd birthday
Length of service is capped at 20 years and weekly pay is capped at £525. The maximum amount of statutory redundancy pay is £15,750.
You can give your staff extra redundancy pay if you want to, or have a qualifying period of less than 2 years.
You can use the redundancy pay calculator to work out payments.
If you do not pay
If you fail to pay redundancy pay or if an employee disagrees with the amount, they have 3 months from the date their employment ended to make a claim for payment to an employment tribunal.
If an employee does not claim in time, a tribunal still has 6 months to decide whether or not they should get a payment.
If you have financial difficulties
If your business would become insolvent as a result of making the statutory redundancy payments, the Insolvency Service’s Redundancy Payments Service may be able to help.
You’d have to repay any debt as soon as possible - contact the Redundancy Payments Helpline for more information.
Redundancy Payments Helpline
Telephone: 0330 331 0020
All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service.
These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.
These businesses can contact HMRC’s new dedicated COVID-19 helpline from 11 March 2020 for advice and support.
To ensure ongoing support, HMRC have made a further 2,000 experienced call handlers available to support firms and individuals when needed. If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 0159 559.
Following a consultation on this matter, the government’s ‘Good Work Plan’ released in December 2018 has confirmed that legislation will be introduced to increase the holiday pay calculation reference period. From 6 April 2020, the reference period will be extended from 12 weeks to 52 weeks, to allow a fairer approach to holiday pay when workers carry out flexible working hours.
If Pay Check manage your holiday pay accrual and calculations, we will be affecting this change in calculation automatically through our payroll software.
***EDIT*** 18.03.20 - In a shock announcement the government have delayed the application of IR35 to the private sector to FY2122 - employers will have until April 2021 to get to grips with the new legislation.
https://www.cityam.com/ir35-reforms-to-be-delayed-for-a-year-due-to-coronavirus/
***
The off-payroll working rules have been in place since 2000 to ensure fairness between individuals who work in a similar way. They are designed to make sure that an individual who works like an employee, but through their own limited company, pays broadly the same Income Tax and National Insurance contributions as other employees. The rules do not apply to the self-employed.
This measure will apply to engagements with medium or large-sized organisations in the private and third sectors. It will shift responsibility for operating the off-payroll working rules from the individual’s PSC, to the organisation or business that the individual is supplying their services to. This includes responsibility for deciding whether the rules should apply and deducting the associated employment taxes and National Insurance contributions.
Engagements with small organisations outside the public sector are exempt, minimising administrative burdens for the vast majority of businesses.
The regulations should be applied thus:
the party paying the worker’s PSC (the ‘fee-payer’) is treated as an employer for the purposes of Income Tax and Class 1 National Insurance contributions
the amount paid to the worker’s intermediary for the worker’s services is deemed to be a payment of employment income, or of earnings for Class 1 National Insurance contributions for that worker
the party paying the worker’s intermediary (the ‘fee-payer’) is liable for secondary Class 1 National Insurance contributions and must deduct tax and National Insurance contributions from the payments they make to the worker’s intermediary in respect of the services of the worker
the person deemed to be the employer for tax purposes is obliged to remit payments to HMRC and to send HMRC information about the payments using Real Time Information (RTI) - which Pay Check would do on behalf of our clients with the usual payroll submissions.
It is important to note that your responsibility as an employer does not extend to including such workers in your auto enrolment scheme.
If you are setting up an individual on your payroll due to this regulation, please indicate it on your starter information, so that we can exempt them from the pension scheme.