What does the autumn budget mean for payroll?
The Autumn Statement brought relatively few changes that will affect PAYE payrolls this coming April.
Probably the biggest change was in the announcement of further changes possible with the IR35 tax system. This would bring the private sector in line with the public sector with more ‘contractors’ treated as ‘employees’, with their tax and NI deducted at source. There is a consultation planned next Spring. There was some anticipation of a move in April, but now it appears there will be a consultation process first.
Personal taxation thresholds will be adjusted in April, but the rates of 20%, 40% & 45% remain the same. The thresholds for Scotland will be announced after the Scottish budget is fixed in December. The marriage allowance has also had some adjustment.
| 2017 | 2018 | |
| Personal Allowance | £11 500 | £11 850 |
| Basic Rate Tax Band | £33 500 | £34 500 |
| Additional Rate Tax Band | £150 000 | £150 000 |
| Marriage Allowance | £1 150 | £1 185 |
The National Insurance thresholds have also been increased a little, although the rates remain the same.
| Weekly Rates | 2017 | 2018 |
| Lower Earnings Limit (to qualify for SMP etc) | £113 | £116 |
| Primary Threshold (Employee starts paying NI) | £157 | £162 |
The National Minimum Wage and National Living Wage (NLW) rates also will be increasing from April 2018.
| 2018 Rate | |
| 25yrs old and over (NLW) | £7.83 |
| 21 – 24 years old | £7.38 |
| 18 – 20 years old | £5.90 |
| 16 – 17 years old | £4.20 |
| Apprenticeship Rate | £3.70 |
The employment allowance remains at £3000 per year, and the Apprenticeship Levy allowance also remains at £15000.
What impact do the tax and NI changes have to my employees?
There are too many variables to give an accurate answer to this, but there will generally be a little less tax and a little less National Insurance deducted.
However, if we consider an employee of thirty years old on £20 000 per year, with a standard tax code giving the full personal allowance –
2017
| Tax : 20 000 – 11 500 = 8 500 | Basic rate at 20 % = £1700 |
| NICs: 20 000 – 8 164 = 11 836 | Employee NI at 12% = £1420.32
Employer NI at 13.8% = £1633.37 |
2018
| Tax: 20 000 – 11 850 = 8 150 | Basic Rate at 20% = £1630 |
| NICs: 20 000 – 8424 = 11 576 | Employee NI at 12% = £1389.12
Employer NI at 13.8 % = £1597.49 |
So in this example the employee will pay around £100 less per year in tax and NI, and the employer around £35 less NI. Remember, these rough calculations make many assumptions and do not take into account items such pension contributions.
So, what does the Autumn Budget mean for Payroll?
There will be a small uplift in tax codes in April 18, and employees and employers may notice a small reduction in their PAYE payments. Those employees on National Minimum Wage or National Living Wage will see their rates increase by around 4.5%.
For further information on rates please see here.
