Important payroll tax changes commencing from 6 April 2017

There are a range of important changes that are coming into effect in April 2017…

Tax Codes

From 6 April the new personal allowance for tax will increase to £11,500 per annum regardless of an individual’s date of birth.

UK Rate of Income Tax

From 6 April 2017 the UK tax rates and bandwidths are:

UK Rate %Bandwidth
Basic Rate20£1 to £33,500
Higher Rate40£33,501 to £150,000
Additional Rate45£150,001 and above

Scottish Rate of Income Tax

From 6 April 2017 the Scottish tax rates and bandwidths are:

Scottish Rate %Bandwidth
Basic Rate20£1 to £31,500
Higher Rate40£31,501 to £150,000
Additional Rate45£150,001 and above

National Insurance Contributions (NIC)

From 6 April 2017, the monthly salary that can be paid without incurring tax or national insurance will remain at £680.00 per month.

This year there is 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 continue to process your monthly amount based on the above rate from 6 April 2017 unless instructed otherwise.

Please note National Insurance contributions are unaffected by the Scottish rate of income tax.

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 we are provided 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 £866 a week (£45,000 per annum) 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

The apprenticeship levy is part of the Government’s plan to increase the quantity and quality of apprenticeships.  The levy is a new tax which aims to fund three million new apprenticeships in England by 2020.

The levy will come into effect from April 2017 and 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 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.

For further advice and information, please contact Claire Brown.