Employers Class 1 NIC for Apprentices under 25 to be abolished

With effect from 6 April 2016, you may be interested to learn that you may no longer have to pay employer  Class 1 NICs for apprentices under the age of 25.

Currently employer Class 1 NICs are due for all employees aged 21 or over.

 

For the tax year 2016-17 it is proposed that the new NI category H will be used for apprentices who in addition to being under 25 are:

• working towards a Government recognised apprenticeship in the UK which follows a government approved framework/standard

and

• have a written agreement (between employer, apprentice and training provider), giving the government recognised apprentice framework or standard, with a start and expected completion date.

Employers NIC will be at a rate of 0% up to the new Apprentice Upper Secondary Threshold, which will be aligned with the Upper Secondary Threshold for the tax year beginning 6 April 2016.  Earnings above the Apprentice Upper Secondary Threshold (for 2015-16 £3,532 per month) will be at the full rate of 13.8%.

This does not affect the calculation of primary Class 1 NICs deducted from apprentices.

For more information see the HMRC website

Updated advice on penalties for not reporting payroll information on time

 

What you need to know

The HMRC has introduced penalties for employers who report their payroll information late.  These apply from:

▪   6th October 2014 for employers with more than 50 employees

▪   6th March for employers with less than 50 employees

 

 

A penalty can be charged if:

▪   Your Full Payment Submission  (FPS) was late

▪   You did not sent the expected number of Full Payment Submissions

▪   You did not send an Employer Payment Summary when you did not pay employees in a tax month

HMRC will not charge a penalty if

  • Your FPS is late but all reported payments on the FPS are within 3 days of your employees’ payday (applies from 6 March 2015 – 5 April 2016)
  • you are a new employer and you have sent your first FPS within 30 days of paying an employee or if it’s the first failure within the tax year to submit your report on time.
  • It’s your first failure in the tax year to send the report on time (not applicable to employers who are registered with the HMRC on the annual scheme).

For more information about how to avoid penalties for late submission see the HMRC website

 


Changes to Thresholds and Tax Codes for 2015/16 – are you ready?

From 6th April 2015, the new tax year begins.  This years’ changes are listed below in a quick reference guide:

Headlines

The Personal Allowance has risen to £10,600, and the Basic Rate has reduced to £31,785.

Rate                            %                     Bandwith

Basic Rate                   20%                 £1 to £31,785

Higher Rate                 40%                 £31,786 TO £150,000

Additional Rate            45%                 £150,0001 and above

Changes to Income Tax Allowances

Personal Allowance                                  2014/15           2015/16           Change

Those born after 5 April 1948                       £10,000           £10,600          £600

Born between 6 April 1938 – 5 April 1948    £10,500           £10,600           £100

Those born before 6 April 1938                    £10,660           £10,660           -

National Insurance Contribution thresholds                                                         

                                                                    2014-15           2015/16

                                                                   £ per week   £ per week

Weekly Lower Earnings Limit (LEL)                111                  112

Weekly Primary Threshold (PT)                      153                  155

Weekly Secondary Threshold (ST)                 153                  156

Upper Earnings (UEL)                                    805                  815

Upper Profits Limit (UPL)                          41,865 pa        42,385 pa

Upper Secondary Threshold for U21s (*3)     N/A                  815

Employment Allowance (per employer)          2,000 pa          2,000 pa

*3 Upper Secondary Threshold (UST) introduced from April 2015 for employees under the age of 21.  The rate of secondary NICs for employees under the age of 21 on earnings between ST and UST will be 0%.

Class 1 National Insurance Contribution rates 2015-16

Employees (primary)                                  Employer (Secondary)

Earnings                  NIC rate                      Earnings        NIC rate

£ per week               per cent                     £ per week     per cent

Below £112                 0                                 Below £156     0

£112-155                     0                                Above £156    13.8

£155-815                     12

Above £815                2

Statutory Adoption Pay

                                                          2014-15           2015-16

Earnings Threshold                             111.00             112.00

Standard Rate                                     138.18             139.58

Statutory Maternity Pay

                                                          2014-15           2015-16

Earnings Threshold                             111.00             112.00

Standard Rate                                     138.18             139.58

Statutory Paternity Pay

                                                          2014-15           2015-16

Earnings Threshold                             111.00             112.00

Standard Rate                                     138.18             139.58

Additional statutory paternity pay        138.18             139.58

Statutory Shared Parental Pay

                                                          2014-15           2015-16

Earnings Threshold                             111.00             112.00

Standard Rate                                    138.18             139.58

Statutory Sick Pay

                                                         2014-15           2015-16

Earnings Threshold                             111.00             112.00

Standard Rate                                     87.55              88.45

Pay in lieu of Notice – When does tax apply?

Making a payment in lieu of notice (PILON) is a way of ending an employment contract with immediate effect meaning that the employee will not work a notice period. An employer will make a payment of the amount that an employee would normally have been paid if they had worked the notice period.

Whether tax is payable on the PILON all depends on the contractual agreement between the employer and the employee and whether it is usual

practice for the employer to make this type of payment.

If under the terms of the contract, the employer has the right to make a payment in lieu of notice then the payment is made as part of the contract and taxable.  The same would apply if it was customary for the employer to make payments in lieu of notice when terminating an employee’s employment regardless of which party chose to give notice to end the contract.

If however, PILON is not covered in the employee’s contract of employment nor customary practice for the employer to make this type of payment, then PILON would be treated as damages for a breach of contract on the part of the employer and so would not be taxable.

Other payments made at the time of leaving such as holiday pay will be taxable as they are a contractual payment.

For more information on PILON please see: http://www.acas.org.uk/index.aspx?articleid=4540

Changes to HMRC requirements for employment Intermediaries take effect on 6 April 2015

The HMRC are responding to increased false self employment on the part of employment intermediaries acting on behalf of self employed workers who should legally be regarded as employed, and therefore attract the same rates of Tax and National Insurance as an employed person would do.

From 6 April 2015, Employment Intermediates must send details of workers they place with clients who are not:

  • Direct employees or,
  • Being treated as employees.

The HMRC has published Draft Reporting Regulations for which the consultation period has just ended (25 November 2014).

For more information about this change and the possible impact it might have to your business see the HMRC website

New penalties for late submission of payroll information

What you need to know

The HMRC has introduced penalties for employers who report their payroll information late.  These apply from:

  • 6th October 2014 for employers with more than 50 employees
  • 6th March for employers with less than 50 employees

A penalty can be charged if:

HMRC will not charge a penalty if you are a new employee and you have sent your first FPS within 30 days of paying an employee or if it’s the first failure within the tax year to submit your report on time.  This also will not apply to employers with fewer than 50 employees for the Tax year 2014-15.

For more information about how to avoid penalties for late submission see the HMRC website

Watch out for Phishing Scams

What is Phishing?

Phishing is the attempt to obtain sensitive personal information such as usernames, passwords, bank or credit card details by masquerading as a reputable organisation through electronic communication.

Definition based on Wikipedia

What types of phishing scams are currently in circulation?

There are loads of different scams in circulation in any one time.  Whether these are purporting to be from “your” bank or more worryingly, there is an increase in deceivingly well presented email scams which purport to be from the HMRC.

HMRC scams have been around for a while, but new versions of scams are frequently being refreshed and re-circulated.  It is becoming increasingly hard for business owners to identify whether an email communication is genuine or not.

Thankfully, help in verifying genuine communication is out there, as is good advice to prevent you from becoming a victim of a scam.

The HMRC have a good online resource to show you current and previous versions of scams as well as advice on the type of unofficial communication you will never receive from them.  Click here for their advice page on scams.

Another good resource for advice against phishing scams and other forms of cyber crime is GetSafeOnline .  GetSafeOnline also provide advice on protecting your computer and data whilst working outside of the office, and compliance with Data Protection.

To report any fraudulent e-communication, contact Action Fraud

Employing Under 21 year olds?

Here is some useful information you need to know

Changes to National Insurance Contributions as of 6 April 2015

Some good news! If you employ anyone under the age of 21 years, Employers Class 1 secondary National Insurance Contributions will change to a rate of 0% up to the equivalent of the new ‘Upper Secondary Threshold’.  At the moment the rate is 13.8% so this is a cost saving that may encourage employers to employ more young people.

We recommend that you check that you have the correct date of birth for your employees stored in your payroll software to ensure that the correct NI rates are used from April 2015.

Useful guide on Employing Staff from the HMRC is available here

Children at work – did you know?

If you are employing a child between the ages of 13 until they are considered as legally having left school, you need to notify the Local Authority, which will be the local County Council or equivalent body.

Each authority publishes guidance on employing young people of school age. As an example to find out what the requirements are for businesses located within East Sussex and when they apply please follow this link to East Sussex County Council guidance.

 

 

 

Received a tax code notice from HMRC?

Each year between January and March, HMRC issue tax code notices to some individuals for the new tax year that starts in April.  HMRC issues a tax code notice so that an employer will deduct the correct amount of tax through the payroll. letter from HMRC

HMRC issues a detailed calculation to the individual and a summary notification to the employer to use the tax code from a specified date. 

It is always worth checking that the information shown on the tax code notice is correct and that there are no items missing or incorrect figures.

If you believe the calculation is wrong then phone HMRC (Tel: 0845 300 0627) to discuss the figures that may be incorrect.  If for example you have a company car and it is not shown on the calculation by HMRC, you will not have sufficient tax deducted from your pay and will end up with a tax liability to pay at a later date unless the tax code notice is amended by HMRC.

At any time during the tax year, HMRC may issue a new tax code notice to an individual which will supersede the existing tax code used by an employer.  The intention of HMRC is to issue the correct tax code to ensure that employees have the correct amount of tax deducted from their income.