Category: PAYE

DMS Posts, PAYE, Tax

Tax and National Insurance rates and bands

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Here are the changes that will come into effect in April 2021:

National Minimum Wage and National Living Wage

Changes will come into effect on 1st April. Note the different age bands for rates in 2021/22.

2021/222020/21
Employees aged under 18: NMW£4.62£4.55
Employees aged 18-20: NMW£6.56£6.45
Employees aged 23 and over: NLW£8.91N/A
Employees aged 25 and over: NLWN/A£8.72
Employees aged 21-24: NMWN/A£8.20
Employees aged 21-22: NMW£8.36N/A

England, Northern Ireland and Wales

Changes will come into effect on 6th April 2021.

2021/222020/21
Personal allowance£12,570£12,500
Employee’s NI becomes due at£9,568£9,500
Employer’s NI becomes due at£8,840£8,788
Higher rate tax becomes due at£50,270£50,000
Class 2 NI becomes due when profits exceed£6,515£6,475
Class 2 NI per week£3.05£3.05
Class 4 NI becomes due when profits exceed£9,568£9,500

Scottish tax rates and bands

Changes will come into effect on 6th April 2021.

2021/222020/21
Personal allowance£0 – £12,570£0 – £12,500
Starter rate 19%£12,571 – £14,667£12,501 – £14,585
Basic rate 20%£14,668 – £25,296£14,586 – £25,158
Intermediate rate 21%£25,297 – £43,662£25,159 – £43,430
Higher rate 41%£43,663 – £150,000£43,431 – £150,000
Top rate 46%Over £150,000Over £150,000

Student Loan repayment thresholds and new Scottish student loan plan

Changes will come into effect on 6th April 2021.

2021/222020/21
Undergraduate loan: plan 1£19,895£19,390
Undergraduate loan: plan 2£27,295£26,575
Scottish student loan: plan 4£25,000N/A
Postgraduate loan£21,000£21,000
DMS Posts, PAYE

What is CEST?

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Definition of CEST

CEST is short for Check Employment Status for Tax. It’s a digital tool designed by HMRC to help public authorities decide if a worker falls inside or outside the scope of IR35.

The tool comes in a quiz-like format and can be accessed here.

Why was CEST introduced?

When off-payroll working rules were introduced to the public sector in 2017, the onus to certify whether a worker fell inside or outside IR35 shifted from the worker to the public sector authority.

HMRC produced the CEST tool to help public sector authorities make these decisions quickly and cheaply.

An updated version of the CEST tool was released in November 2019.

Does CEST only apply to the public sector?

CEST can be used in both the private sector and the public sector but it’s important to note that the private sector is assessed differently under the off-payroll regulations. In the private sector, the onus is on contractors to declare whether they fall inside or outside IR35, rather than their clients.

From April 2021, the rules on off-payroll working in the private sector are set to change, bringing it in line with the rules that apply to the public sector for contractors working with large and medium-sized business clients.

DMS Posts, Other, PAYE, Tax

Inside and outside IR35: What you need to know

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With rules set to change in the private sector from 6 April 2021, it’s important to understand what implications this might have on your contracts and tax bills.

The responsibility for determining your status in the private sector will shift to your client, if they are eligible. If you believe you are outside IR35, you’ll need to ensure your freelance contract and working practices clearly demonstrate your relationship as a contractor.

What’s the difference between inside IR35 and outside IR35?

Your status impacts the employment taxes you will pay.

Inside IR35
  • You pay the same tax and National Insurance as you would if you were an employee. 
  • You are only an employee for tax purposes, you have no employment rights.
  • Your client will be required to pay the necessary tax and NIC, which includes Employers’ NIC and the apprenticeship Levy where applicable.
Outside IR35
  • Nothing changes. You are paid a flat fee as normal and are responsible for managing your own taxes.

How and who pays the appropriate taxes largely depends upon a number of key factors: control over how the work is done, whether your personal service is required and mutuality of obligation. However, how you are set up in business can also be an influencing factor.

Not sure whether your contract is inside or outside?

You can check your employment status for tax using this tool from HMRC

Having a tax specialist review your contract can give you peace of mind. FSB members have access to a contract review service, for an additional fixed fee.

My last contract was outside IR35, but this one is inside?

IR35 applies on a contract by contract basis, so your status may differ depending on the contract agreed.

To remain compliant, you’ll want to brush up on your understanding of the new rules in the private sector.

If you don’t agree with your client’s decision about your employment status the legislation gives you the right to submit a written challenge to the Status Determination Statement and requires the end client to respond within 45 days to further explain their reasoning.

DMS Posts, PAYE

UPDATE ON CORONAVIRUS JOB RETENTION SCHEME (CJRS) – EXTENSION

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HM Gov’s Coronavirus Job Retention Scheme  (CJRS) has been extended until the end of October 2020 but with changes to the system. The last effective date for workers being put on furlough is 10 June. 

The two big changes are the tapering of the financial support given to employers and the rise in their contributions. 

Financial support taper

June and July: HM Gov continue to 80% of wages up to a cap of £2,500 plus employer NIC and pension contributions. 

August: HM Gov still pays 80% of wages up to a cap of £2,500 but employers must pay employer NIC and pension contributions  .

September: HM Gov pays 70% of wages up to a cap of £2,187.50. Employers pay employer NIC and pension contributions and also 10% of wages to make good the 80% total  – up to a cap of £2,500. 

October: The government pays 60% of wages up to a cap of £1,875. Employers pay employer NIC and pension contributions and now 20% of wages to make good the 80% total up- to a cap of £2,500.

Employers are still entitled to top up above those minimum figures.

Flexible furloughing

This is to help businesses wean back employees on to the payroll after June. Part time or ‘flexible furloughing’ as it is called will allow employers and employees to agree to work part-time ( at their contracted full salary rate) and the Furlough Scheme will cover those days when employees are not working.

The matrix will become quite complex and detailed time sheets must be maintained. More detailed information about CJRS is expected on 12 June. For now, for further details on the existing CJRS system please see our old posts or for fuller details see HM Gov facts sheet at :-HMRC Fact Sheet

DMS Posts, PAYE

Extention to the Coronavirus JRS and flexible furloughing

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Coronavirus (COVID-19) Job Retention Scheme useful links

Check if you can claim through CJRS

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme?&utm_source=HMRC-DCS-Handout&utm_campaign=DCS-link&utm_medium=Handout

Claim for wages through CJRS

https://www.gov.uk/guidance/claim-for-wages-through-the-coronavirus-job-retention-scheme?&utm_source=HMRC-DCS-Handout&utm_campaign=DCS-link&utm_medium=Handout

Job retention scheme calculator

https://www.tax.service.gov.uk/job-retention-scheme-calculator/?&utm_source=HMRC-DCS-Handout&utm_campaign=DCS-link&utm_medium=Handout

Guidance on calculating your employee wages to claim

https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme?&utm_source=HMRC-DCS-Handout&utm_campaign=DCS-link&utm_medium=Handout

Steps to take before calculating your claim

https://www.gov.uk/guidance/steps-to-take-before-calculating-your-claim-using-the-coronavirus-job-retention-scheme?&utm_source=HMRC-DCS-Handout&utm_campaign=DCS-link&utm_medium=Handout

Work out your employee’s usual and furloughed hours

https://www.gov.uk/guidance/steps-to-take-before-calculating-your-claim-using-the-coronavirus-job-retention-scheme#usual-hours?&utm_source=HMRC-DCS-Handout&utm_campaign=DCS-link&utm_medium=Handout

Business support finder

https://www.gov.uk/business-coronavirus-support-finder?&utm_source=HMRC-DCS-Handout&utm_campaign=DCS-link&utm_medium=Handout

Get help from HMRC if you need extra support

https://www.gov.uk/get-help-hmrc-extra-support?&utm_source=HMRC-DCS-Handout&utm_campaign=DCS-link&utm_medium=Handout

Working safely during coronavirus (COVID-19) business webinars – find out how to make your workplace COVID-secure

The UK Government, in consultation with industry, has produced guidance for business to help ensure workplaces in England are as safe as possible during the coronavirus pandemic. 

https://www.gov.uk/guidance/working-safely-during-coronavirus-covid-19?&utm_source=HMRC-DCS-Handout&utm_campaign=DCS-link&utm_medium=Handout

Register to join free webinars, hosted by the Department of Business, Energy and Industrial Strategy, to find out more about how to make your workplace COVID-secure.

https://www.eventbrite.co.uk/o/department-for-business-energy-and-industrial-strategy-18685150848?utm_campaign=covid_webinars_2020&utm_medium=referral&utm_source=stakeholder&utm_content=ogds

Check a National Insurance number using Basic PAYE Tools

https://www.gov.uk/government/publications/basic-paye-tools-national-insurance-number-verification-requests-only/basic-paye-tools-with-other-software-check-a-national-insurance-number?&utm_source=HMRC-DCS-Handout&utm_campaign=DCS-link&utm_medium=Handout

NHS test and trace: how it works

https://www.gov.uk/guidance/nhs-test-and-trace-how-it-works?&utm_source=HMRC-DCS-Handout&utm_campaign=DCS-link&utm_medium=Handout