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New Payroll Rates from April 2018

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The 2018-19 tax year means you need to know all the new payroll rates from April 2018.

* The personal allowance increases from £11,500 to £11,850 per year, making the standard tax code 1185L
* The 20 per cent basic rate tax band increases from £33,500 to £34,500 per year
* The lower earnings limit for National Insurance contributions increases from £113 per week to £116 per week or from £490 per month to £503 per month
* The National Minimum Wage increases from £4.05 to £4.20 per hour for 16-17 year olds
from £5.60 to £5.90 per hour for 18-20 year olds
from £7.05 to £7.38 per hour for 21-24 year olds
from £3.50 to £3.70 per hour for apprentices
* The National Living Wage increases from £7.50 to £7.83 per hour for those 25 years old or older
* Statutory Sick Pay increases from £89.35 per week to £92.05 per week
* Statutory Maternity, Adoption and Paternity Pay increases from £140.98 per week to £145.18 per week
* Minimum Automatic Enrolment pension contributions increase from 1% to 2% for employers and from 1% to 3% for employees
* Student loan thresholds increase to £18,330 for Plan 1 loans and to £25,000 for Plan 2 loans

Increases in minimum contributions for automatic enrolment pensions

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Under automatic enrolment, minimum pension contributions are required to increase over time. With effect from 6th April 2018 the total contribution increases from the current minimum of a total contribution of 2% of qualifying earnings, to a total of 5%, and again on 6th April 2019, increasing to a total minimum of 8%.

The employer and the employee can choose to pay more than the minimum contributions if they wish.

Beginning on 6th April 2018, employers may be required to increase the amount of their contributions into their automatic enrolment pension. The total contribution level will be 5%, with the employer paying a minimum of 2% and the employee paying 3%

The contribution levels continue to rise  with effect from 6th April 2019 with the employer paying a minimum of 3% towards the pension and the employee paying 5% to reach the minimum level of 8% contribution.

Date effective Employer minimum contribution Staff contribution Total minimum contribution
Currently until 5 April 2018 1% 1% 2%
6 April 2018 to 5 April 2019 2% 3% 5%
6 April 2019 onwards 3% 5% 8%

More information can be found on The Pensions Regulator website.

New Employers and automatic enrolment

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Taking on staff is an essential part of growing a business and there are several things to consider, including automatic enrolment. Aside from checking whether you need to register as an employer with HMRC; checking if your employee has the legal right to work in the UK and taking out employer’s liability insurance, you will also need to understand your automatic enrolment dates and duties.

The date that your duties start will depend on when you employ your first worker, as this date determines whether you will have a staging date, or whether your duties will begin immediately your member of staff starts work. Automatic enrolment duties apply to all employers. If you start a new PAYE scheme between April 2012 and 30 September 2017 your staging date will be between 1 May 2017 and 1 February 2018. If you become an employer now and don’t use a PAYE scheme to pay your staff, then you will not have a staging date. If your staff earn below £113 per week or £490 per month, HMRC may not require you to set up a PAYE scheme but you still have certain automatic enrolment duties and must start them as soon as you employ your first member of staff.

You must write to you staff to tell them how automatic enrolment applies to them. If they then choose to be put into a pension scheme, you must set this up for them but you do not have to pay into it. When you start to pay your staff over £113 per week, then you must set up a PAYE scheme with HMRC. The Pensions Regulator will then write to you and ask you to complete a declaration of compliance by a specific date. In some cases, directors may be exempt, if they do not have a contract of employment.

Budget Changes that will affect your Payroll from April 2017

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The March 2017 Budget has confirmed the following changes that will affect your payroll from April 2017:

* The personal allowance increases from April 2017 from £11,000 to £11,500 making the standard tax code 1150L.
* The 20% basic tax rate band increases from April 2017 £32,000 to £33,500 per annum.
* The lower earnings limit for National Insurance increases from £112 per week to £113 per week or from £672 per month to £680 per month.
* Statutory sick pay increases from £88.45 to £89.35 per week.
* Statutory Maternity/Paternity/Adoption pay increases from £139.58 to £140.98 per week.
* The National Living Wage for those 25 years old and over increases in April 2017 from £7.20 to £7.50 per hour.
* The National Minimum Wage rates increase in April 2017:21-24 year olds from £6.95 to £7.05;18-20 year olds from £5.55 to £5.60;16-17 year olds from £4.00 to £4.05;apprentice rate from £3.40 to £3.50.
* The Apprenticeship Levy starts April 2017 for businesses whose monthly pay bill is £250,000.
* Tax-Free Childcare will be gradually rolled out from April 2017 for children under 12. If you qualify, the 20% relief of costs of childcare up to a total of £10,000 per child means it will be worth a maximum of £2000 per child.
* The VAT registration threshold increases on 1st April 2017 from £83,000 to £85,000.
* Corporation tax rate reduces from 20% to 19% for the financial year beginning 1st April 2017.

The Apprenticeship Levy

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The Apprenticeship Levy will be introduced in April 2017 to all employers operating in the UK, with a pay bill over £3 million each year, to invest in apprenticeships. Your annual pay bill is all payments to employees that are subject to employer Class 1 secondary National Insurance contributions such as wages, bonuses and commissions.

Apprenticeship Levy is charged at 0.5% of your annual pay bill but you are given a £15,000 annual allowance to offset against this.
For example: If your April 2017 pay bill is £300,000, your levy of 0.5% would be £1500 less £1250 allowance, so you would pay a £250 levy for April 2017.

If you are unsure if you qualify, you must contact HMRC for further advice. As with the employment allowance, this levy is shared across a group of linked companies.

The levy will not affect the way you fund training for apprentices who started an apprenticeship programme before 1 May 2017.  You’ll need to carry on funding training for these apprentices under the terms and conditions that were in place at the time the apprenticeship started.

You will report and pay your levy to HMRC through the payroll process via an RTI EPS submission each month.  Once you have declared the levy to HMRC, you will be able to access funding for apprenticeships through the new apprenticeship service account.  HMRC are working with employers to test and improve the service before inviting all levy-paying employers to register for the service.