What's changing, what's not, and what's new?

Tax Year 2122

***Important - All clients must read and complete the form below***

 

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.

Please read ALL of the below changes and then submit your Employment Allowance eligibility and any year end requests on the form at the bottom of this page.

If we do not receive a form back from you, we will assume that your eligibility for the employment allowance has remained the same as tax year 20-21, until we hear otherwise.

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 payroll manager for more guidance.

For those that find it useful, here is our updated Pay Date & Submission Calendar for the new tax year!

Pay Check Pay Date Submission Calendar 2021-2022

National Minimum Wage

From April 2021, the Government will increase the National Living Wage (NLW) and National Minimum Wage (NMW) rates to protect workers’ living standards.

The big notable change is that the age to receive the top rate is now being dropped from 25 to 23.

The new wage increase varies from 1.5% to 3.6% depending on the age group.

National Minimum Wage

The National Minimum Wage is the minimum pay per hour almost all workers are entitled to by law.

These rates apply from 1 April 2021.

Category of workerHourly rate
Aged 23 and above (national living wage rate)£8.91
Aged 21 to 22 inclusive£8.36
Aged 18 to 20 inclusive£6.56
Aged under 18 (but above compulsory school leaving age)£4.62
Apprentices aged under 19£4.30
Apprentices aged 19 and over, but in the first year of their apprenticeship£4.30
Changes to how we process NI codes for employees of pensionable age

You will be aware that in the past we have always asked our clients to provide confirmation they have proof of age and to change the NI code for an employee that reaches pensionable age (A to C) - with the information of their age and NI code provided on our payroll reports.

Since migrating to our new payroll software, we have an automatic validation that changes the NI code when the employee reaches pensionable age.

We believe this offers our clients a better service to use this automated function, and catch NI code changes as soon as they are due, so it will be turned on from April payroll. This means as soon as an employee reaches pensionable age, they will no longer pay Employee NIC, per national regulations.

To that end, we ask all our clients to pay close attention to the date of birth and age that is provided on your salary detail report, and inform us if any changes are needed.

Changes to the Job Retention Scheme

From 1 July 2021, the level of grant will be reduced and you will be asked to contribute towards the cost of your furloughed employees’ wages. To be eligible for the grant you must continue to pay your furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they spend on furlough.

The table below shows the level of government contribution available in the coming months, the required employer contribution and the amount that the employee receives per month where the employee is furloughed 100% of the time.

Wage caps are proportional to the hours not worked.

 MayJuneJulyAugustSeptember
Government contribution: wages for hours not worked80% up to £2,50080% up to £2,50070% up to £2,187.5060% up to £1,87560% up to £1,875
Employer contribution: employer National Insurance contributions and pension contributionsYesYesYesYesYes
Employer contribution wages for hours not workedNoNo10% up to £312.5020% up to £62520% up to £625
For hours not worked employee receives80% up to £2,500 per month80% up to £2,500 per month80% up to £2,500 per month80% up to £2,500 per month80% up to £2,500 per month

You can continue to choose to top up your employees’ wages above the 80% total and £2,500 cap for the hours not worked at your own expense.

There are also updates to the pay reference period which you can find under this link:
https://www.gov.uk/guidance/calculate-how-much-you-can-claim-using-the-coronavirus-job-retention-scheme

IR35 - Off payroll working

The off-payroll working rules

The off-payroll working rules can apply if a worker (sometimes known as a contractor) provides their services through their own limited company or another type of intermediary to the client.

An intermediary will usually be the worker’s own personal service company, but could also be any of the following:

  • a partnership
  • a personal service company
  • an individual

The rules make sure that workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same tax and National Insurance contributions as employees. These rules are sometimes known as ‘IR35’.

The client is the organisation who is or will be receiving the services of a contractor. They may also be known as the engager, hirer or end client. The client will be responsible for determining if the off-payroll working rules apply.

New Rules Are Coming In April 2021 – Who do they apply to ?

From 6 April 2021 the way the rules are applied will change.

All public sector authorities and medium and large-sized private sector clients will be responsible for deciding if the rules apply.

If a worker provides services to a small client in the private sector, the worker’s intermediary will remain responsible for deciding the worker’s employment status and if the rules apply.

You may be affected by these rules if you are:

  • a worker who provides their services through their intermediary
  • a client who receives services from a worker through their intermediary
  • an agency providing workers’ services through their intermediary

If the rules apply, tax and National Insurance contributions must be deducted from fees and paid to HMRC.

What do you need to provide to Pay Check?

You will need to provide us with the figure to be paid after VAT has been deducted, and employee details plus a starter checklist and CLEARLY advise us that it's an Off Payroll Worker so that we can flag it correctly on the RTI submission to HMRC.

How to calculate deemed direct payments

The deemed direct payment is the amount paid to the worker’s intermediary that should be treated as earnings for the purposes of the off-payroll rules.

  1. Work out the value of the payment to the worker’s intermediary, having deducted any VAT.

  2. Deduct the direct costs of materials that have, or will be, used in providing their services.

  3. Deduct expenses met by the intermediary that would have been deductible from taxable earnings if the worker was employed.

  4. The resulting amount is the deemed direct payment. If it is nil or negative there is no deemed direct payment.

You then need to deduct Income Tax and employee National Insurance contributions as appropriate from the deemed direct payment. You also need to pay employer National Insurance contributions. Employer National Insurance contributions cannot be deducted from the deemed direct payment.

You’ll need to report the pay and deductions you make to HMRC using a Full Payment Submission, as you do for workers on your payroll. You should indicate that this person is an off-payroll worker.

You do not have to add these workers to your existing payroll, but you can do this if you wish. If the payments are not reported under your existing PAYE scheme, then you’ll have to open a new one.

Helpful Links

Responsibilities: https://www.gov.uk/guidance/fee-payer-responsibilities-under-the-off-payroll-working-rules

Deemed Employment Payment: https://www.gov.uk/guidance/how-to-calculate-the-deemed-employment-payment

Tax thresholds, rates and codes

England and Northern Ireland

PAYE tax rates and thresholds 2021 to 2022
Employee personal allowance £242 per week
£1,048 per month
£12,570 per year
English and Northern Irish basic tax rate 20% on annual earnings above the PAYE tax threshold and up to £37,700
English and Northern Irish higher tax rate 40% on annual earnings from £37,701 to £150,000
English and Northern Irish additional tax rate 45% on annual earnings above £150,000

Scotland

PAYE tax rates and thresholds 2021 to 2022
Employee personal allowance £242 per week
£1,048 per month
£12,570 per year
Scottish starter tax rate 19% on annual earnings above the PAYE tax threshold and up to £2,097
Scottish basic tax rate 20% on annual earnings from £2,098 to £12,726
Scottish intermediate tax rate 21% on annual earnings from £12,727 to £31,092
Scottish higher tax rate 41% on annual earnings from £31,093 to £150,000
Scottish top tax rate 46% on annual earnings above £150,000

Wales

PAYE tax rates and thresholds 2021 to 2022
Employee personal allowance £242 per week
£1,048 per month
£12,570 per year
Welsh basic tax rate 20% on annual earnings above the PAYE tax threshold and up to £37,700
Welsh higher tax rate 40% on annual earnings from £37,701 to £150,000
Welsh additional tax rate 45% on annual earnings above £150,000

Emergency tax codes

The emergency tax codes from 6 April 2021 are:

  • 1257L W1
  • 1257L M1
Class 1 National Insurance thresholds
Class 1 National Insurance thresholds 2021 to 2022
Lower earnings limit £120 per week
£520 per month
£6,240 per year
Primary threshold £184 per week
£797 per month
£9,568 per year
Secondary threshold £170 per week
£737 per month
£8,840 per year
Upper secondary threshold (under 21) £967 per week
£4,189 per month
£50,270 per year
Apprentice upper secondary threshold (apprentice under 25) £967 per week
£4,189 per month
£50,270 per year
Upper earnings limit £967 per week
£4,189 per month
£50,270 per year

Employee (primary) contribution rates

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

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%
Statutory Sick Pay (SSP)

The same weekly SSP rate applies to all employees. However, the amount you must actually pay an employee for each day they’re off work due to illness (the daily rate) depends on the number of ‘qualifying days’ they work each week.

Unrounded daily ratesNumber of qualifying days in week1 day to pay2 days to pay3 days to pay4 days to pay5 days to pay6 days to pay7 days to pay
£13.76427£13.77£27.53£41.30£55.06£68.83£82.59£96.35
£16.05836£16.06£32.12£48.18£64.24£80.30£96.35 
£19.27005£19.27£38.54£57.81£77.08£96.35  
£24.08754£24.09£48.18£72.27£96.35   
£32.11663£32.12£64.24£96.35    
£48.17502£48.18£96.35     
£96.351£96.35      
Statutory Maternity, Paternity, Adoption, Shared Parental and Parental Bereavement Pay

These rates apply from 4 April 2021.

Type of payment or recovery2021 to 2022 rate
SMP – weekly rate for first 6 weeks90% of the employee’s average weekly earnings
SMP – weekly rate for remaining weeks£151.97 or 90% of the employee’s average weekly earnings, whichever is lower
Statutory Paternity Pay (SPP) – weekly rate£151.97 or 90% of the employee’s average weekly earnings, whichever is lower
Statutory Adoption Pay (SAP) – weekly rate for first 6 weeks90% of employee’s average weekly earnings
SAP – weekly rate for remaining weeks£151.97 or 90% of the employee’s average weekly earnings, whichever is lower
Statutory Shared Parental Pay (ShPP) – weekly rate£151.97 or 90% of the employee’s average weekly earnings, whichever is lower
Statutory Parental Bereavement Pay (SPBP) – weekly rate£151.97 or 90% of the employee’s average weekly earnings, whichever is lower
SMP, SPP, ShPP, SAP or SPBP – 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

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82 Silverthorne Road, London, SW8 3HE

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