Monthly Archives: March 2014

New Payroll Tax Year

With 5 April, 2014 just 5 days away there are a few changes to tax and National Insurance thresholds.

  • Employees can earn up to £7,956 per year (£153 per week and £663 per calendar month);
  • Employers NI threshold is the same as above;
  • The tax threshold depends on the employees tax code, however, someone on the full personal allowance of £10,000 can earn up to this amount each year without paying tax (£192 per week and £833 per calendar month)

This means that directors of owner-managed companies who want to extract a low salary combined with a dividend can pay themselves £663 per month without paying any Employees and Employers National Insurance and without paying tax.

Topping this salary up with a dividend is subject to enough profit being available and account must also be taken of salary levels required to obtain certain allowances such as disability allowance.

Ask your accountant before taking action on the above (see my disclaimer page)

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Payroll Processing Changes from 6 April, 2014

There are various payroll processing data-item and rule changes for the new tax year on 6 April, 2014. These changes include:

  • Employment Allowance of up to £2,000
  • Tax code increase to 1000L (uplift of L codes)
  • Abolition of SSP Recovery Scheme
  • Increase in student loan recovery threshold
  • Changes to rates, bandwidths and thresholds for PAYE, NI and statutory payments
  • Employer Bank Account details declared on EPS payroll filing (RTI filing)
  • Hours worked banding changes
  • RTI late filing reason indicator
  • Scheme Contracted Out Number (SCON)

Brief details are provided below, however, you should consult your accountant or payroll bureau regarding these changes before taking action.

Employment Allowance – reduction of Employers Class 1 NIC by up to £2,000

From 6 April, 2014 most employers will be able to claim the Employment Allowance to reduce their employer Class 1 National Insurance Contributions (Employers NIC’s) by up to £2,000 each tax year.

You claim the allowance by basically underpaying your employers NIC to HMRC until the £2,000 allowance is used up. Your payroll software will have a dialogue box to claim the allowance.

Automatic Tax Code increases for 2014/15

HMRC have announced a general ‘uplift’ of all tax codes with an ‘L’ suffix by 56. For example, if an employee had a tax code of 944L in 2013/14 (full personal allowance) their tax code would be uplifted by 56 to 1000L from 6 April. If you receive separate coding notifications from HMRC to change an employees tax code then you must apply HMRC’s coding notice figure.

Abolition of Statutory Sick Pay (SSP) Recovery  

From 6 April, 2014 employers will no longer be able to reclaim Statutory Sick Pay paid to employees.

Increase in student loan recovery threshold

From 6 April, 2014 the student loan recovery threshold will increase to £16,910.

Changes to rates, bandwidths and thresholds for PAYE, NI and statutory payments

From 6 April, 2014 the rates, bandwidths and thresholds for PAYE, National Insurance and statutory payments (such as Statutory Sick Pay and Statutory Maternity Pay) will change.

Employer Bank Account details declared on EPS payroll filing

From 6 April, 2014 the employers bank details can optionally be included in the Employer Payment Summary (EPS).

Hours worked banding changes

From 6 April, 2014 the number of bands used by HMRC for normal hours worked will be increased from four to five.

RTI late filing reason indicator

From 6 April, 2014 a late PAYE reporting reason for each employee must be included where relevant in the full payment submission (FPS)

Scheme Contracted Out Number (SCON)

From 6 April, 2014 SCON numbers for employers in COSR (contracted out salary related) schemes must be included in their Full Payment Submissions (FPS).

These employees use NI category letters D, E or L. The SCON number must be reported in addition to the employers’ contracted-out number (ECON).

This does not affect a lot of smaller businesses.

Disclaimer

This blog should not be regarded as offering a complete explanation of the subject matter and therefore you should seek professional advice before taking any action or non-action based on it.

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RTI Payroll End of Year Processing 2013/14

We are fast approaching the end of the first year of RTI on 5 April, 2014.

As a result of the new RTI procedures there is no longer a requirement to submit P35 Employer Annual Returns and associated P14 Employee End of Year Summary’s.

All that you need to do this year is:

  • Pay your employees for the final pay period for the year to 5 April, 2014
  • Do your usual RTI submission on or before the final pay day of the year
  • Complete your end of year declarations (such as are P11D’s due etc.), see your payroll software guide. This declaration is the same as was previous done on the old P34 Employer Annual Return. This must be submitted on or before the final pay day of the year. If this is not possible, it must be submitted by 19 April, 2014 at the latest.
  • Create a new payroll data file for 2014/15
  • Provide a P60 as usual for each employee by 31 May, 2014

There are a number of changes in the rules affecting payroll processing from 6 April and a further blog will be published in the next few days.

For further support, ask your accountant or payroll software supplier.

This blog should not be regarded as offering a complete explanation of the subject matter and therefore you should seek professional advice before taking any action or non-action based on it.

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Get Ready for Pension Auto-Enrolment

Within 36 month’s, all employers will have to automatically enrol workers into a workplace pension scheme if they

  • are aged between 22 and State Pension age
  • earn more than £9,440 a year
  • work in UK

This is called ‘automatic enrolment’. Some small employers may already offer a workplace pension scheme even if the business does not make contributions. Under pension Auto-Enrolment, the employer will have to make contributions by law into a pension scheme for their eligible employees.

Enrolment is being phased in and larger firms of 250 or more employees have already had to comply. Between 1 April 2014 and 1 April 2015 employers with 50 to 249 employees will also have to comply.

For smaller businesses the phasing in will be as follows:

  • Employers with 30 to 49 employees – required to Auto-enrol their employees in a pension scheme between 1 August 2015 and 1 October 2015
  • Employers with fewer than 30 employees – required to Auto-enrol their employees in a pension scheme between 1 January 2016 and 1 April 2017

The start date for some businesses may seem a long way off, but it will soon be time to start writing your action plan and to plan changes in payroll systems if pension deductions are to be made from employees’ pay.

The amounts that are paid into the scheme are:

Up to 30 September 2017 – Employers pay a minimum of 1% of gross salary and employees 1%

1 October 2017 to 30 September 2018 – Employers pay a minimum of 2% of gross salary and employees 3%

1 October 2018 onwards – Employers pay a minimum of 3% of gross salary and employees 5%

Note that although Automatic enrolment only applies to employees earning over £9,440, those earning between £5,668 and £9,440 still have a right to opt in. Those earning less than £5,668 have a right to join a pension scheme.

Now is a good time to ask your accountant or payroll adviser for the date you will have to register and operate pension Auto-Enrolment (your ‘staging date’). You should also seek advice from your financial adviser and accountant/payroll bureau and start your action plan.

This blog should not be regarded as offering a complete explanation of the subject matter and therefore you should seek professional advice before taking any action or non-action based on it.

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