Payroll Changes for the April 2016 Tax Year Part 2

By March 9, 2016Payroll Outsourcing

Payroll Changes for the April 2016 Tax Year Part 2

Although there may be surprises in the budget, HMRC are currently publishing thresholds, giving anticipated payroll changes for the April 2016 tax year among other things.

Basic tax free Allowance

This is expected to increase to £11 000 per year, not £10 800, which is £917 per month rather than the current £883.  The new tax code will be 1100L

Scottish Income Tax is also being introduced. The HMRC rate is decreased by 10%, and then the Scottish Rate of Income Tax will also be at 10% for this year. Employees subject to this tax will have an ‘S’ prefixed to the tax code, so the code may look like ‘S1100L’. See here for further details

The higher rate threshold will be on earnings from £32 001 to £150 000.

The National Insurance Thresholds

The National Insurance threshold changes are mixed for the next year. Some rates are changing and some remain the same. The rates at which employers start paying NICs for under 21s, and apprentices under 25, are also being increased slightly.

Lower Earnings Limit £486 per month
Primary Threshold
employees start NI contributions
£672 per Month
Secondary Threshold
employers start NI contributions
£676 per month
Upper Secondary Threshold £3583 per month (increased)
Apprentice Upper Secondary Threshold £3583 per month (increased)
Upper Earnings Limit £3583 per month (increased)

 

Contracted Out Pensions

Another change this year is contracted out rates for pensions are to be discontinued. This will affect employees with a National Insurance category D or N, and will mostly be those employed in the health, education or local government sectors.

This should not have a major impact, but there seems to be some variation with how employers are explaining the changes to their workforce.

 

These are the anticipated changes, please see later posts or our FAQs for the actual rates.  You can also see here for further details and updates.