The new payroll year begins April 2019 and employers should be aware of the following changes:
- Income Tax
- National Insurance
- Employment Allowance
- Student Loan Repayments
- Postgraduate Loan Deductions
- Starter Checklist
- Statutory Payments
- Minimum Wage
- Tax-Free Childcare Schemes
- Automatic Enrolment
Income Tax allowances
The basic personal allowance for the tax year commencing 6th April 2019 increases to £12,500 and the standard tax code is 1250L.
As a result, there will be a general uplift of tax codes with suffix ‘L’ which will increase by 65.
In addition to this, there is also a general uplift of marriage allowance tax codes with suffix ‘M’ increasing by 71 and suffix ‘N’ increasing by 59.
Individual tax codes for the year commencing 6th April 2019 will be issued for some employees and employers should have received these either via email or by post as paper P9 notices of coding by 22ndMarch 2019.
Income Tax bands and rates
The income tax rates and income tax bandwidths for the tax year starting 6th April 2019 are shown below:
|Basic Rate||20%||£1 to £37,500|
|Higher Rate||40%||£37,501 to £150,000|
|Additional Rate||45%||£150,001 and above|
National Insurance contributions (NICs) earnings limits and thresholds
- The main rate of primary Class 1 NICs remains unchanged at 12%
- The Class 1 secondary rate of NICs remains unchanged at 13.8%. This rate also applies to Class 1A and Class 1B NICs
- The additional rate of primary Class 1 NICs remains unchanged at 2%
- The Lower Earnings Limit increases to £118 per week/£512 per month
- Both the Primary Threshold (for employees) and the Secondary Threshold (for employers) increases to £166 per week/£719 per month
- The Upper Earnings Limit (UEL) increases to £962 per week/£4,167 per month
- The Upper Secondary Threshold (for employers with employees under 21) increases to£962 per week/£4,167 per month
- The Apprentice Upper Secondary Threshold (for employers with apprentices under 25) increases to £962 per week/£4,167 per month.
This will continue for all eligible businesses and charities in 2019-20 and the maximum value of the allowance will remain at £3,000 a year.
The allowance is claimed by offsetting amounts against the Class 1 Secondary National Insurance due in a pay period and is accounted for in the normal payroll process. Please note, the allowance cannot be offset against Class 1A or Class 1B National Insurance.
In the Autumn 2018 budget, the Government announced that the Employment Allowance would be restricted to smaller employers. As it’s a flat rate regardless of the size of the employer, and is therefore less likely to be an incentive for larger employers, it would be restricted to eligible businesses and charities with a National Insurance bill of under £100,000 in the previous tax year.
If agreed, the change would take effect from the 2020-21 tax year.
Student Loan Repayments
From 6th April 2019, the student loan repayment threshold for Plan 1 employees increases to £18,935. The Plan 2 threshold also increases to £25,725. Contributions will continue to be calculated at 9%.
Postgraduate Loan Deductions
The Department of Education has introduced a new loan repayment known as Postgraduate Loans (PGL)
Loan repayments commence from 6th April 2019. These are treated in the same way as Student Loan Repayments. The annual repayment threshold is £21,000 and contributions are calculated at 6% for the 2019-20 tax year.
If your employee has a PGL, HM Revenue & Customs (HMRC) will send you a new start notice (PGL1) and ask you to start making deductions. HMRC in turn, will issue a stop notice (PGL2) if deductions should cease.
Employees may also be liable to repay a Student Loan at the same time as a PGL. HMRC will confirm this by continuing to send the normal Student Loan start notices.
The Starter Checklist, previously known as form P46 will be updated from 6th April 2019 because of the Student/Post Graduate Loan changes. A new version of the checklist will shortly become available on the GOV.UK website. We would encourage you to use this to make sure deductions are being taken under the correct plan or loan type.
Statutory Sick Pay (SSP)
From 6th April 2019, the rate of statutory sick pay increases from £92.05 to £94.25. To be entitled to SSP, employees will require average weekly earnings of at least £118.00.
Statutory Maternity Pay (SMP)
The rate of statutory maternity pay also increases from £145.18 to £148.68 (or 90% of the employee’s average weekly earnings if this figure is less than the statutory rate). The change in the SMP weekly rate is effective from Sunday 7th April 2019. To be entitled to SMP, the employee must have average weekly earnings of at least;
- £116 if baby is due on or before 13th July 2019
- £118 if baby is due on or after 14th July 2019
Statutory Paternity Pay (SPP) and Statutory Adoption Pay (SAP)
Also, on 1st April 2019, the rates of statutory paternity pay and statutory adoption pay increase from £145.18 to £148.68 (or 90% of the employee’s average weekly earnings if this figure is less than the statutory rate). Entitlement is per that of SMP as noted above.
Recovery of Statutory Payments
The general rate at which employers can recover Statutory Maternity, Paternity and Adoption Pay from HMRC will remain at 92%. Small employers (if you pay £45,000 or less in Class 1 National Insurance) will continue to recover 100% plus an additional compensation rate. The additional compensation rate will remain at 3%.
The Percentage Threshold Scheme (PTS) which allowed employers to reclaim SSP in certain circumstances, was abolished in April 2014.
Future changes – New Entitlement to Parental Bereavement Leave and Pay
The Government is introducing a new workplace right to Parental Bereavement Leave and Pay for parents who lose a child under the age of 18,including those who suffer a stillbirth from 24 weeks of pregnancy. Work is underway to get regulations laid before Parliament this year with the intention of commencement from 6th April 2020.
Employed parents will be entitled to two weeks of leave. Those with at least 26 weeks of continuous service at the date of their child’s death and earnings above the Lower Earnings Limit will be entitled to pay equivalent to the statutory pay rates as noted above for the 2020-21 tax year.
The National Minimum and National Living Wage rates will be going up on the 1st April 2019.
The National Living Wage for those aged 25 and over increases from £7.83 to £8.21 per hour.
The National Minimum Wage rates (per hour) also increase as follows:
- or workers aged 21 to 24, the rate increases from £7.38 to £7.70
- For workers aged 18 to 20, the rate increases from £5.90 to £6.15
- For workers aged 16 and 17, the rate increases from £4.20 to £4.35
- For apprentices under the age of 19 or those aged 19 and over who are in their first year of an apprenticeship, the rate increases from £3.70 to £3.90
The daily accommodation offset increases from £7.00 to £7.55
For more information, please see our minimum wage article.
In its Spring 2016 report, the Low Pay Commission recommended that employers should be required to state clearly the number of hours that a worker is being paid for on the payslips of hourly paid workers. This would help the workers identify whether they are being paid at least the correct minimum wage rate.
New legislation comes into force from 6th April 2019 and requires all employers to:
- provide payslips to all workers
- show hours on payslips where the pay varies by the amount of time worked.
Tax-Free Childcare Schemes
As mentioned in last years’ article, Childcare Voucher schemes closed to new applicants on 4th October 2018. These have been replaced with Tax-Free Childcare, which provides parents with up to £2,000 per child (£4,000 for disabled children) per year, towards approved childcare costs.
Employees who joined a scheme before 4th October 2018 will see no change and continue to benefit from this arrangement.
Automatic Enrolment (AE)
Contribution levels are increasing and come into effect from 6th April 2019. The table below summarises the changes:
| Minimum |
|Employee Contribution||Total Minimum Contribution|
|6th April 2019 onwards||3%||5%||8%|
For more information and details on your re-enrolment duties, please see our pension article.