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Bob L

Tax & National Insurance

Tax & National Insurance for the 2015/16 Tax Year

We have picked out some of the headline Tax and National Insurance rates for the year ending April 2016:

PAYE Tax

Allowances April  2015 – March 2016
Personal Allowance £10,600
Tax Rates Taxable Income
20% Up to £31,785  Basic Rate
40% over £31,785 up to £150,000 Higher Rate
45% over £150,001  Additional

 

National Insurance

Employees
Lower Earnings Limit Primary Threshold
(12% contributions)
Upper Earnings Limit
(2% contributions)
Weekly £112 £155 £815
Monthly £486 £672 £3532
Yearly £5824 £8060 £42385
NI Category A Most employees not in a contracted out pension scheme
NI Category C Employees over the state pension age
NI Category M Employees under 21 not in a contracted out pension scheme
NI Category X Employees don’t have to pay National Insurance

These are the commonly used categories, for more information visit the HMRC website

Employer
Lower Earnings Limit Secondary Threshold
(13.8%)
Upper Secondary Threshold* Upper Earnings Limit
(13.8%)
Weekly £112 £156 £815 £815
Monthly £486 £676 £3532 £3532
Yearly £5824 £8112 £42385 £42385

*Point where 13.8% contributions commence for NI category M

NI Category A Employers contribute 13.8% above the Secondary Threshold
NI Category C Employers contribute 13.8% above the Secondary Threshold
NI Category M No Employer contributions until the Upper Secondary Threshold
NI Category X No Contributions

If you want manual tax calculation tables please see here, and for manual National Insurance calculations see here

 

Payroll Options have put this very simple guide together to give an indication of bands and contribution rates.  This should not be relied upon for calculations and for further guidance please contact us.

Statutory Payments to April 2016

Statutory Payments for the 2015/16 Tax Year

Statutory Sick Pay (SSP) 2015/2016
Minimum weekly earnings to qualify £112.00
Weekly rate of SSP £88.45
Statutory Maternity Pay (SMP)
Minimum weekly earnings £112.00
Higher weekly rate for first 6 weeks 90 % of average weekly earnings (in the qualifying period)
Lower weekly rate for 33 weeks is the lesser of £139.58 or 90% of average weekly earnings

SMP is now paid for up to 39 weeks within this period an employee may have 10 keep in touch days (KIT) which will not effect the payment of SMP

Ordinary Statutory Paternity Pay (OSPP)
Minimum weekly earnings £112.00
Weekly rate for up to 2 weeks is the lesser of £139.58 or 90% of average weekly earnings
Statutory Adoption Pay (SAP)
Minimum weekly earnings £112.00
Weekly rate for up to 39 weeks Is now in line with SMP

All employers are entitled to recover 92% of the SMP/OSPP/SAP they pay.

If you qualify for Small Employers Relief (annual liability for National Insurance less than £45,000) you are entitled to recover 100% of the SMP/SPP/SAP you pay plus 3% for payments made after 6th April 2014.

Statutory Redundany Pay

The statutory redundancy rate is £475.00 maximum per week

You can also visit the HMRC website for more details.

Directors National Insurance

National Insurance for Directors is classed differently from that of employees.   There are two methods which can be used for Directors National Insurance namely Cumulative (or Directors) and Table Method (or alternative).

Cumulative Directors National Insurance applies Annual Thresholds for calculating the amount due and as such no National Insurance is due until the earnings for the tax year exceed the Annual Earnings Threshold.  National Insurance is then paid on all earnings until the Annual Upper Earnings Threshold is reached at which point all remaining earnings until the end of the tax year have a rate of 2% Employee National Insurance applied.

The effect of Cumulative Directors National Insurance which is most often noticed is that the Employees National Insurance deducted can fluctuate considerably with each payroll even if the payment is the same.

Table Method Directors National Insurance applies the appropriate thresholds for the payroll frequency, ie if paid monthly the monthly Thresholds are used.  The amount of National Insurance deducted by Table Method Directors National Insurance is identical to that by standard Employee National Insurance, other than in the final payment of the tax year the total amount of National Insurance is recalculated for the complete tax year.

In total for a complete tax year the amount of Employees National Insurance deducted by either method of Cumulative or Table Method Directors is the same, the main difference is that with Cumulative Directors National Insurance the deduction fluctuate with each payroll whereas the Table Method are constant so long as the payment is the same.

If you wish to discuss outsourcing your payroll to Payroll Options, please contact us

National Minimum Wage to October 2015

From 1st October 2014

Age Rate / Hour Comments
21 years and over £6.50
18 – 20 years £5.13 also for those aged 22 years and over on accredited training course
16 – 17 years £3.79
Apprentices under 19 £2.73 also apprentices over 19, but in the first year of their apprenticeship

 

 

Visit HMRC for the most up to date information

End of the Tax Year

We are now drawing to a close the 2014 /15 tax year. This is a very busy time of year for us as we complete year end procedures and then move all the payrolls through to the new tax year. There are several changes for April 2015, as have been mentioned previously, and we have to be prepared to meet these.

 

The P60s will be produced once all other procedures are successfully completed, and will generally start to be sent out at the beginning of April. All employees employed on the 5th April should have received their P60 by the 31st May.

Pension Payment Types

Pensions can get very complicated, but if you just look at each piece separately it is possible to gain an understanding. One common question is regarding net, gross for tax and salary exchange schemes.

 

  • A net scheme is deducted after tax and NI, the tax is then reclaimed at the basic rate by the pension company.
  • A gross for tax scheme is deducted before tax but after NI.
  • A salary exchange is a benefit resulting in a lower gross salary, so before both tax and NI.

 

No one scheme will suit every employee and every company and you will need to seek further advice when choosing a pension.

Fit for Work Scheme

The Fit for Work Scheme has had some press coverage recently. It is part of the government’s attempts to assist people back to work, and away from sickness benefits. There is a free telephone number – 0800 032 6235 for England & Wales – and a website – www.fitforwork.org, or www.fitforworkscotland.scot.

 

These steps are not mandatory but the aim is to enable small companies to have access to occupational health schemes. The scheme is designed for employees that have been absent for more than four weeks, or are expected to be absent for four or more weeks. The result is a Return to Work Plan with advice and recommendations with how to get the employee back to work.

 

The referral for an occupational health assessment is free, and from the 1st January 2015 there is a £500 tax exemption per employee per year for recommend medical treatments. This has no direct impact to payroll, other than maybe there will be less SSP. If you want more information there are guidance notes available here.

New Codes for April 2015

New National Insurance Categories April 2015

Tax Allowance Changes

One of the changes from April 2015 is that part of the tax allowance can be transferred from one spouse, or civil partner, to the other. This is available if at least one partner earns below the threshold or only pays basic rate tax. There will be an online process for employees to apply for the transfer and two new suffixes for the tax codes, an M for the recipient and N for the transferor.

 

The transferor will be able to move up to £1060 of their allowance to their partner. There will then be a coding notice issued which will be applied in the usual way. We do not anticipate any issues with these changes but we imagine take up may well be very low unless HMRC embarks on a determined publicity campaign.

 

If you want some further information you can see here, but is anticipate that people would be unable to start the application process until after the 6th April 2015.

 

National Insurance Categories

As well as the new tax codes there are to be seven new NI codes introduced in April as well. These are related to the previously reported under 21s employer NIC saving, and there has even been a new NI band introduced as well. We do not anticipate this causing any problem other than a note that the employer should choose the appropriate NI code for the employee.

 

For interest the codes are as below –

 

M – Not contracted out standard rate contributions
Z- Not contracted out deferred rate contributions
Y – mariners not contracted out standard rate contributions
P – mariners not contracted out deferred rate contributions
V – mariners contracted out salary related contributions
I – contracted out salary related standard rate contributions
K – contracted out salary related deferred rate contributions

 

With V I K to be removed in April 2016.  If you want further information please see here.

Holiday Pay

 

Holiday pay should take into account the amount of wages an employee would usually receive, not just their contractual salary. This was effectively the finding from last year’s employment tribunal and the UK Government have been reviewing the findings; we do not know when to expect the final ruling.

 

The government is taking steps to try and provide some certainty and limit the impact on UK business. The current proposal appears to be a transition period of six months, and then claims cannot be backdated more than two years.

 

The UK Working Time Regulations will need to be interpreted in a new way, or changed. But it seems that things will change, we are just not quite sure what the changes shall be. If you want more information on the current proposal see here.

Newsletter January 2015

Happy New Year!

Below is an extract from our January Newsletter with  a couple of points worth noting –

 

Compulsory Dates of Birth
Due to HMRC requirements with immediate effect we must be supplied with a Date of Birth for all new employees.
Please be aware that we will not be able to add an employee to your payroll if you do not supply a Date of Birth.
If you are unsure of the information required for a new employee please consider using our ready-made New Employee Form which will provide all of the information that we require. Please complete the pink cell with your Payroll Number and Company Name, please also ensure that they select a Starter Declaration.

 

https://www.payrolloptions.com/wp-content/uploads/2014/10/Employee-Details-Form.xltx

 

Charges/Penalties from HMRC
HMRC are introducing Charges/Penalties in respect of Real Time Information (RTI):
1. Payments to HMRC must match the total due for the month as per the RTI submissions made by us
2. RTI submission must be received by HMRC on or before your pay date, as quoted on the front page of your reports, if you feel the pay date that we are quoting is incorrect please inform us immediately.