Changes For Employers
With 6th April 2018 fast approaching, I summarise the key changes that will affect employers in the new tax year.
Most businesses and charities qualify for the Employment Allowance, which is offset against the employer’s National Insurance bill. This allowance is intended to help small businesses who want to hire their first employee or expand their workforce. It is not available to one-person companies where the only employee is the sole director.
The 2018/19 employment allowance will remain at £3,000 as it was in the current tax year.
This is in addition to the National Insurance breaks for staff earning under the Secondary Threshold (£892 per week for 2018/19) and those aged under 21 or, if an apprentice, under 25.
Employees’ and Employers’ National Insurance
As in previous years, employees and employers will both start paying National Insurance when wages reach the appropriate threshold in 2018/19. This threshold will rise to £162 per week.
Personal Allowance and Tax Codes 2018/19
Every UK taxpayer is initially entitled to a personal allowance, which is an amount that they can earn before any tax is due. The personal allowance for 2018/19 will rise from £11,500 to £11,850 in 2017/18. Anyone earning over £100,000 will have their personal allowance reduced by £1 for every £2 of additional income, with the personal allowance being removed entirely for those with income over £123,700.
This should mean that most employees with a single employment will have a tax code of 1185L. Where someone has multiple sources of income under PAYE, including pensions as well as other jobs, then this code will normally be split between those sources of income. A tax code can also be adjusted for other reasons, such as to collect unpaid tax from earlier years. HMRC should send a letter out to each taxpayer showing how their code is determined for each income source. Taxpayers and their agents can telephone HMRC to amend codes if necessary, either to correct erroneous information or to split the allowance between income sources differently.
National Minimum Wage
The National Minimum Wage is the minimum pay per hour almost all workers are entitled to by law. The rates below apply from 1st April 2018:
• Aged 25 and above (national living wage rate) – £7.83
• Aged 21 to 24 inclusive – £7.38
• Aged 18 to 20 inclusive – £5.90
• Aged under 18 (but above compulsory school leaving age) – £4.20
• Apprentices aged under 19 – £3.70
• Apprentices aged 19 and over, but in the first year of their apprenticeship – £3.70
Under the Pensions Act 2008, every employer in the UK must put certain staff into a workplace pension and pay into it. This is called automatic enrolment.
The rules have gradually been phased in since 2012, with the largest employers going first. Most employers have now reached their ‘staging date’, and from October 2017 it has been mandatory for all new employers to automatically enrol their eligible staff into pension schemes. A number of factors determine individual employees’ eligibility for auto enrolment, with the level of earnings being the key factor for most. Depending on their status, employees will have rights to opt in to a pension if not automatically eligible, or opt out if they do not wish to be part of the scheme despite being eligible.
The Pensions Regulator has produced a collection of detailed guidance documentation to assist employers understand auto enrolment. These documents can be found here. (tinyurl.com/nblfwrb)
The minimum contribution levels are set to increase over the next few years as follows:
Company cars are those made available for private use by an employer to their staff or directors. The employee/director is taxed based on a percentage of the value of the car as what is known as a ‘benefit in kind’. The percentage used to calculate this benefit in kind is normally dictated by the car’s fuel type and its official CO2 emissions figure.
In a bid to discourage gas-guzzlers, the percentages applied will increase by 3% across the board from April 2019. This will mean a larger tax bill for the employees and more National Insurance for employers.
While this is some time away, it is worth considering now as any car purchases within the coming year can take this expected uplift into consideration. If the business isn’t intending to update the fleet this year, at least this allows business owners to budget accordingly for the increase in National Insurance.
Employers To Do List
Whilst not a comprehensive list, here are a few things employers need to be doing ahead of the new tax year starting on 6th April 2018:
• Make sure you’re claiming the Employment Allowance if your business is eligible
• Make sure staff have the right National Insurance letter against them in your payroll software, to ensure their contributions are calculated correctly
• Check tax codes are updated in the new tax year
• Ensure payroll is updated for the new rates of national minimum wage
• Increase pension deductions for relevant staff in April
• Review budgets to ensure staff and pension costs are accurate
• Consider changing the motor fleet for cars with lower CO2 emission figures. If changing is not desired or practical ensure that forecasts for 6th April 2019 onwards reflect the higher National Insurance liability that will arise.
• For assistance with these, or any other tax or accounting matters, call Steve Brown at TaxAssist Accountants on 01424 211800 to arrange a free, no-obligation appointment to discuss your needs.
Discaimer: Advice shared in this article is intended to inform rather than advise. Taxpayers’ circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
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