From 6 April the new personal allowance for tax will increase to £11,000 per annum regardless of an individual’s date of birth and the basic rate income limit will be increased to £32,000. Therefore for all employees who are presently on a tax code of 1060L this will be increased by 40 points to 1100L.
National Insurance Contributions (NIC)
From 6 April 2016, the monthly salary that can be paid without incurring tax or national insurance will remain at £672.00 per month.
This year there also continues to be a difference between the primary threshold for employees NIC and the secondary threshold for employers NIC. The difference is £4.00 and the secondary threshold remains at £676.00.
Employer National Insurance Contributions for employees under 21 and apprentices under 25
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.
From 6 April, if you employ an apprentice you may not be required to pay employer class 1 NIC on their earnings below £827 a week (£43,000 per annum) if you’re apprentice is under 25 years old and is following an approved UK government statutory apprenticeship framework.
The standard rate for Statutory Maternity, Paternity and Adoption Pay will remain at £139.58 per week and the rate of Statutory Sick Pay will also remain at £88.45 per week.
To be entitled to these statutory payments, an employee’s average earnings must at least be equal to the lower earnings limit which remains at £112.00 per week.
The New National Living Wage (NLW)
From April, the Government’s New National Living Wage will become law. Employers need to make sure that they’re paying employees correctly from the 1st April 2016, as the NLW will be enforced as strongly as the current National Minimum Wage.
If any of your employees are aged 25 or over and not in the first year of an apprenticeship, they will be legally entitled to at least £7.20 per hour.
Scottish Rate of Income Tax
The Scottish rate of income tax will be 20% and it will be calculated by the UK income tax rates being reduced by 10 percentage points for employees living in Scotland. They will then pay the Scottish rate of 10% on top of their UK rate. For example, if an employee pays tax at the basic rate of 20% this will be reduced to 10%. They will then pay the Scottish rate of 10% on top of this giving a total of 20%.
There is no overall change to the income tax rate they pay whether they pay the basic, higher or additional rates but some of the tax will be collected under the Scottish rate and this will fund the Scottish Government, and the rest will continue to fund the UK government.
The employment allowance will increase from £2,000 to £3,000 from April 2016. If there are any other companies/groups, charity structures which are connected then only one PAYE scheme can claim the allowance. The basic rule for determining if two companies or more are connected with each other is if one of them has control of the other or if they are under the control of the same person or persons.
Employers are responsible for in excess of 200 duties in relation to planning, implementation and ongoing governance of the workplace pension scheme. Employers should begin to consider their options at least 12 months prior to their staging date, so please contact our Wealth Management Team to ensure that you understand your obligations and reduce any exposure to penalties.
For further advice regarding any of the topics mentioned in this blog post, please contact our Payroll Manager, Claire Brown.
Taxation depends on individual circumstances as well as tax law and HMRC practice which can change.