DMS Posts, PAYE, Tax

Tax and National Insurance rates and bands

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?

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, PAYE, Tax

Coronavirus Job Retention Scheme – What do we know so far?

The Government announced an extensive package of support on Friday 20 March for employers coping with the commercial difficulties arising from Covid-19. This has been welcomed by employers, many of whom we have been speaking to, who have been extremely concerned about how to pay wages when revenues have dried up or they have been forced to close. Those businesses have been facing very tough choices around lay off, short term working and redundancies – while trying to balance the finances, needs of the business and the livelihoods of their staff and communities. 

The key measure announced to help employers is the Coronavirus Job Retention Scheme. Through this, employers can claim a grant to cover up to 80% of an employee’s wage costs. At the time of writing (19:00 on 22 March), we are awaiting detailed guidance as to exactly how this will work: but what do we know about the scheme so far?

Which employers are eligible for the scheme?

All UK employers can apply – you don’t need to be in any specific sectors, just pay people via PAYE. This includes businesses of any size and includes charitable or non profit. 

How do you access the scheme?

According to guidance on the Gov.uk webpage, employers will need to:

  • designate affected employees as ‘furloughed workers,’ and notify their employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.
  • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will set out further details on the information required.

It is unclear at this time what (if any) financial information an employer would need to provide to HMRC to show that you cannot cover staff costs due to Covid-19. 

The employer will be able to claim a grant of up to 80% of the employees wage for all employment costs, up to a cap of £2,500 per month.

The scheme will be backdated to 1 March (useful for employers who have already had to make lay offs) and will be open for at least 3 months, but extended ‘for longer if necessary’. 

As this is a reimbursement grant, the employer will make the wage payment to the furloughed employee and then be reimbursed by HMRC. At this stage the timescale is unknown, although the Chancellor suggested the first payouts could be made by the end of April at the latest. Please see here for more details of support that may assist with cash flow through this time.

What does Furloughed mean?

There is no previous legal term for this and it is a completely new concept to English Employment Law. The common definition of to ‘furlough’ is to allow or force someone to be absent temporarily from work. 

We understand that if an employer needs to make an employee redundant or lay them off, they can instead discuss with the employee them becoming classified as a ‘furloughed worker’. This would mean they would remain on the employer’s payroll, rather than being made redundant or laid off with no pay. Their employment would continue but they could not undertake any work for the employer while classified in this way.  

We are still waiting for the detail, but it seems most likely that if an employee has an express lay off clause in their contract, the employer could designate the employee as a furloughed worker. The employer would need to discuss this with staff. 

If the employee does not have a lay off clause in their contract, the employer is likely to need to have a discussion and seek the employee’s consent to be classified as a furloughed worker.  Given that the alternative could be redundancy, most employees are likely to agree. This may depend on what amount of paid notice, Statutory Redundancy Pay and holiday pay they would receive if made redundant. It may also depend on whether the employer is able to ‘top up’ the pay (so the furloughed worker is paid 100% not 80%) or offer for the employee to take or be paid for their accrued but not yet taken annual leave as well. 

Does the employer have to pay more than 80% to Furloughed Workers?

No – the early guidance is clear that the employer could choose to fund the differences between this payment and the employee’s salary, but does not have to.

At this point in time we don’t know whether the 80% grant is limited to just salary or whether it extends to include Employers National Insurance or costs for any benefits such as pensions, health insurance etc. Although it seems unlikely, this might mean that the sum actually paid to the employee is less than 80% of net salary, so care should be given by employers when communicating with staff to say that wage payments for furloughed employees will be in accordance with the scheme.  

We also don’t know how that 80% would be calculated for those whose monthly or weekly salary varies. Again at this stage it is best to communicate to those staff that payments will be in accordance with the scheme once clarified. 

Possible knock on impacts?

At this stage, it is right to feel relieved that there will be a safety net. Further clarification will be welcome, especially in the following areas which could become problematic as this develops:

  • If an employer need some employees to continue to work, how do they choose who to classify as a furloughed worker and who should work on? In the absence of any guidance, we would recommend a selection criteria akin to a redundancy selection matrix, making sure you avoid any discriminatory criteria. It will be interesting to see whether any Government emphasis is placed on giving furloughed status to those who have medical conditions that place them at higher risk from Covid-19 or those who need to care for dependants. Without that Government emphasis employers may face discrimination risks in doing so. 
  • How do you deal with dissatisfaction of those good employees that you ask to carry working on, when other possibly less high performing employees are offered and become furloughed?
  • How do you deal with those on Maternity? We expect it will be the position that those on maternity remain on maternity leave until they wish to return, at which point you would need to assess whether there is work for them or offer them to be furloughed. This could cause issues given that the payment to employees who are furloughed could be significantly higher than statutory maternity pay.
  • What about those who are currently off sick or self isolating on SSP? Should they be furloughed?
  • If there is a delay in payment by HMRC, can you pass that delay on to your employees? This seems unlikely to be encouraged and without provision by the Government may amount to a breach of contract or unlawful deduction of wages. HMRC has set-up a dedicated helpline on 0800 0159 559 for businesses and individuals in financial distress.

We anticipate HMRC will provide details in due course and we will provide updates regularly. In the interim we recommend you regularly check the Gov.uk website which is being updated most days.

DMS Posts, PAYE, Tax

Latest guidance for employers

HMRC has issued the latest version of the Employer Bulletin. This April edition has articles on a number of issues including:

  • Cash Allowances, Flexible Benefits Packages and Salary Sacrifice
  • Unpaid work trials and the National Minimum Wage
  • Diesel Supplement Company Car Tax Changes to meet Euro standard 6d
  • Student Loans
  • Construction Industry Scheme – helpful reminders for contractors and subcontractors
  • Welsh rate of income tax and Scottish Income Tax.

If you have any queries on payroll matters please contact us.

Internet link: Employer Bulletin April 2019

DMS Posts

Advisory Fuel Rates from 1 March 2019

The advisory fuel rates are changing from the 1st March 2019.

These rates apply to employees who claim back fuel expenses when using a company car.

The previous rates can be used for up to 1 month from the date the new rates apply.

Engine sizePetrol – amount per mileLPG – amount per mile
1400cc or less11 pence7 pence
1401cc – 2000cc14 pence8 pence
Over 2000cc21 pence13 pence
Engine sizeDiesel – amount per mile
1600cc or less10 pence
1601cc – 2000cc11 pence
Over 2000cc13 pence

Hybrid cars are treated as either petrol or diesel cars for this purpose.

Advisory Electricity Rate
The Advisory Electricity Rate for fully electric cars is 4 pence per mile.
Electricity is not a fuel for car fuel benefit purposes.