IMPORTANT PAYROLL TAX CHANGES

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1 IMPORTANT PAYROLL TAX CHANGES COMMENCING FROM 6 APRIL 2018 Tax Codes From 6 April the new personal allowance for tax will increase to 11,850 per annum regardless of an individual s date of birth. For all employees who are presently on a tax code of 1150L this will be increased by 35 points to 1185L. UK Rate of Income Tax From 6 April 2018 the UK tax rates and bandwidths are: UK Rate Bandwidth Basic Rate Higher Rate Additional Rate to 34,500 34,500 to 150, ,001 and above Scottish Rate of Income Tax The most significant change to the Scottish tax rates is the move from a three-band tax system to five. From 6 April 2018 the Scottish tax rates and bandwidths are: Scottish Rate Bandwidth Starter Rate Basic Rate Intermediate Rate Higher Rate Top Rate to 2,000 2,001 to 12,150 12,151 to 31,580 31,581 to 150, ,001 and above Please note it is really important that employers track their Scottish employees to ensure that they are taxed under the correct legislation. It would be appreciated if you would continue to encourage your employees to advise you and HMRC of any changes in address to ensure all records are kept up to date. This also means that HMRC can also ensure employees are taxed at the applicable tax rate.

2 National Insurance Contributions (NIC) From 6 April 2018, the monthly salary that can be paid without incurring tax or national insurance will increase form per month to This year there continues to be no difference between the primary threshold for employees NIC and the secondary threshold for employers NIC. Directors who pay themselves at the threshold should ensure they secure the qualifying year for state benefits without actually paying NIC. If we process your payroll we will increase your monthly amount based on the above rate from 6 April 2018 unless instructed otherwise. Please note National Insurance contributions are unaffected by the Scottish rate of income tax. (i.e. NIC bands in Scotland are the same as in the rest of the UK) Paying Employer National Insurance Contributions for employees under 21 Employers are not currently required to pay employers class 1 NIC on earnings up to the upper earnings limit for employees who are under the age of 21. We will continue to amend your employees NI category where applicable to M to ensure the correct rate is applied. However, you must ensure that you provide us with the correct dates of birth to enable us to do this. Paying Employer National Insurance Contributions for apprentices under 25 You can continue to employ an apprentice where you may not be required to pay employer class 1 NIC on their earnings below 892 a week ( 46,350 per annum). This applies if you re apprentice is both: Under 25 years old Following an approved UK government statutory apprenticeship framework If you have apprentices that satisfy the above conditions you must hold strong evidence to apply the relief and retain the supporting information in case of an HMRC inspection. The below link provides further details. Apprenticeship Levy There are no changes to the apprenticeship levy, which is part of the Government s plan to increase the quantity and quality of apprenticeships. All UK employers who have a total employee pay bill above 3m a year will pay the levy. This includes public and private sector, charities and educational providers such as academy groups and universities. The levy rate is set at 0.5 of your pay bill however employers will continue to get a 15,000 fixed annual allowance to offset against the levy payment. Employers who operate multiple payrolls where the companies are connected will only be able to claim one allowance and should consider the optimum position in advance of the first payroll submission. (Connection is based on the same rules as the employment allowance. If you have any doubts regarding this please contact me to discuss.) Unless you confirm the connected companies and how the allowance should be allocated between connected companies we will assume that the 15k allowance should be applied to each payroll based on how we have dealt with the employment allowance or continue with the spilt we were advised for the previous tax year. Our tax advisory team would be happy to advise you on the optimum allocation at your request, however this will be outside of our general payroll scope and an additional one off fee would be proposed.

3 Statutory rates The standard rate for Statutory Maternity, Paternity and Adoption Pay will increase to per week. The rate of Statutory Sick Pay will increase to per week. To be entitled to these statutory payments, your employee s average earnings must be at least equal to the lower earnings limit which is per week. Student Loan Recovery An employee s earnings threshold at which repayment of student loan begins is 18,330 per year ( 1, per month) for those on Plan 1. The threshold for Plan 2 is 25,000 ( 2, per month). The rate of the deduction has not changed and remains at 9. National Living Wage (NLW) and the National Minimum Wage (NMW) From April the following hourly rates will apply: 7.83 (> 25) 7.38 (21-24) 5.90 (18 20) 4.20 (16-17) 3.70 (Apprentices) HMRC s enforcement activity has increased significantly over the last couple of years. Not only can noncompliant employers face repaying arrears to current and former employees, businesses can also face 200 penalties (this could be up to 20,000 per employee). They also have the prospect of their reputation being damaged from being named in the media. We will amend payroll records where they are based on an hourly rate. In all other cases please contact your payroll administrator as soon as possible to discuss your employee s rate of pay if they require increases. Please note if your payroll period is split over two months, for example the 25th March to 24 April, we will require your changes earlier than the normal processing time as it could potentially be very time consuming to split the individual rates. We may need to agree a one off fee for this calculation split depending on how many employees are affected. If you do discover that you have underpaid an employee please contact your payroll administrator as soon as possible. Self-correction of any errors prior to HMRC identifying them will minimise the risk of penalties.

4 Automatic Enrolment Statutory Increases from April 2018 Minimum Contribution Levels The table below shows the current minimum contribution levels and the statutory increased amounts due in April The table has assumed that as the employer, you pay the minimum allowable, meaning that the employee must meet the remainder of the minimum overall total percentage (*): Dates Minimum Employer Minimum Employee Minimum Total Now to 5th April th April 2018 to 5th April (*) based on Qualifying Earnings from April 2018 which are earnings that fall between 6,032 and 46,350 per annum ( 503 to 3,863 per month). If applicable, you will receive a report from your payroll administrator in due course detailing current contributions levels and proposed increases for you to review and sign off before the April 2018 payroll is finalised. If you do not already have a salary sacrifice scheme in place, this is the time to consider getting one. There are considerable amounts of savings to be had for you and your employees. If you would like to know more, please contact clair.williams@taitwalker.co.uk or rachael.matthewson@taitwalker.co.uk. Gender Pay Gap Reporting From April 2017, employers that have more than 250 employees must publish and report specific figures about their gender pay gap. The deadline to publish is 4 April The gender pay gap is the difference between the average earnings of men and women under your employment and the results must be published on your public facing website. You must also report this data to the Government via online services within the tax year. If you have fewer than 250 employees you can publish and report voluntarily but you are not obliged to do so. For further guidance please see the following links: We can provide additional services to assist our clients with gender pay gap reporting so please let me know if you would like to discuss how we can help you. Please note that this service will be additional to our existing service agreement.

5 Other Payroll Related Reminders Payrolling benefits in-kind (PBIK) Don t forget that employers may choose to report employee benefits in kind via the payroll so that tax is collected throughout the year. This means that in most cases you only need to submit the P11D(b) Employer Declaration at the year-end rather than completing forms P11D for each employee. If you would like us to report your employee benefits in kind via your payroll please contact Dates Minimum Total clair.williams@taitwalker.co.uk or claire.brown@taitwalker.co.uk for a fee proposal. Employment Allowance The employment allowance will continue to be 3,000 from April We will continue to deduct this from your employer class 1 NIC if we have been to date, but please remember that not every employer is eligible. If there are any other companies/groups or charity structures that are connected, only one PAYE scheme can claim the allowance. Where the company is connected to other companies, please advise where the employment allowance should be allocated. Employer Provided Childcare & Tax- Free Childcare From April 2018, if you provide employer supported childcare to your employees this may continue for existing qualifying scheme members. However, new employees will not be able to join your existing childcare scheme. These employees will need to consider the new scheme which is called Tax-Free Childcare. Tax-Free Childcare is part of the government s long-term plan to support working families. If your employees are unsure what they are entitled to they may find the following website link helpful: Under the Tax-Free Childcare Scheme, tax relief is 20 of the costs of childcare up to a total of 10,000 per child per year. It is therefore worth a maximum of 2,000 per child. All children under 12 within the first year of the scheme will be eligible. To qualify for Tax-Free Childcare, all parents in the household must: Meet a minimum income level based on working sixteen hours per week at the National Minimum Wage ( 120 per week at current rates) Each earn less than 100,000 a year, and Not already be receiving support through Tax Credits or Universal Credit. As an employer, there is no requirement for you to offer or administer the Tax-Free Childcare Scheme, although we recommend that you make employees aware that it is available to them. Additionally, current members of the employer supported childcare scheme will be able to switch to the new scheme if they wish to.