WITH THE NEW TAX YEAR JUST AROUND THE CORNER, HMRC HAS ISSUED AN UPDATE ON THE UK’S PAYROLL AND TAX LEGISLATION.
New NIC thresholds
In line with the governments manifesto promise not to increase the rates of income tax, NICs and VAT, the threshold at which taxpayers start to pay NICs will rise to £9,500 per year for both employed (Class 1) and self-employed (Class 4) people. There will also be a small increase in the threshold at which employers will start paying NIC, last years threshold of £8,632 will increase to £8,788
NIC limits and thresholds 2020/21
Lower earnings limit (LEL)
– £120 per week (2019/20 – £118)
– £520 per month (2019/20 – £512)
– £6,240 per year (2019/20 – £6,136)
Primary threshold (PT)
– £183 per week (2019/20 – £166)
– £792 per month (2019/20 – £719)
– £9,500 per year (2019/20 – £8,632)
Secondary threshold (ST)
– £169 per week (2019/20 – £166)
– £732 per month (2019/20 – £719)
– £8,788 per year (2019/20 – £8,632)
Upper earnings limit (UEL)
– £962 per week (2019/20 – £962)
– £4,167 per month (2019/20 – £4,167)
– £50,000 per year (2019/20 – £50,000)
– Weekly amount £3.05 (2019/20 – £3.00)
– Small profits threshold £6,475 (2019/20 – £6,365)
– Weekly amount £15.30 (2019/20 – £15.00)
– Lower profits limit £9,500 per year (2019/20 – £8,632)
– Upper profits limit £50,000 per year (2019/20 – £50,000)
Income tax thresholds
The tax bands have not been announced. However, it is expected that the 40% income tax threshold will remain.
The standard Personal Allowance is currently £12,500, which is the amount of income you do not have to pay tax on. This is expected to remain the same.
The optimum director’s salary will increase from £8,632 per annum (£719 per month) to £8,784 per annum (£732 per month), this will attract no tax and no national insurance. However, by increasing this figure to £9,516 per annum (£791 per month) you could take advantage of a potential 5% tax saving. Here at RLTP we can give you advise on which option is best for you and your company.
From 6 April 2020, Class 1A (employer only) NICs are introduced on termination payments over £30,000. Employers will be required to complete a manual calculation and enter that in the Full Payment Submission (FPS).
Proposed changes for the Employment allowance
From 6th April 2020 the eligibility rules for claiming Employment Allowance will be changing.
The Employment Allowance will be withdrawn for employers (and connected employers) with a Class 1 secondary National Insurance liability of £100,000 or more in the tax year before the year claim.
Small employers will need to make additional checks to see if they are eligible to claim the employment allowance, this includes checking de minimis state aid.
Claims will not automatically renew, and you will need to put in a new claim each year. You should let your payroll administrator know whether you’re eligible or not.
Eligibility after 6 April 2020
You can only claim EA if your total (secondary) Class 1 National Insurance contributions (NICs) liability is below £100,000 in the tax year before the year of claim. You do not need to include deemed payments in your calculations.
More than one payroll:
– Add together the employers NICs liabilities for each payroll
If the total amount is:
– £100,000 or more you will not be eligible to claim EA
– under £100,000 you will be eligible. Employment Allowance can only be claimed once so you should decide which payroll should make the claim.
– Add together the total employers NICs liabilities for all companies in the group.
If the total amount is:
– £100,000 or more – none of the connected companies will be eligible to claim EA
– below £100,000 – the group must decide which one company will claim
Statutory payments 2020/21
SMP, SAP, SPP, SHPP, SPBP (Statutory parental bereavement pay will be introduced in Great Britain only) – £151.20 per week from 5th April 2020
SSP – £95.85 per week from 6th April 2020
Student loan thresholds
The Department for Education has confirmed from April 2020 the thresholds for the repayment of Plan 1 and Plan 2 Student Loans. The thresholds for postgraduates will remain the same.
Threshold for payments
Rate of deduction
£21,000 (no change)
There has been no announcement made in respect of the apprenticeship levy.
The levy is currently charged at a rate of 0.5% of an employer’s pay bill. Each employer receives an allowance of £15,000 to offset against their levy payment. This is expected to remain the same.
The Government has announced its first budget will take place on the 11th March; we will continue to keep you updated.