An introduction… Payroll Legislation Changes for 2015-16
…Other budget changes – reminders
Income Tax Allowances
The basic personal allowance for the tax year starting 6 April 2015 will be increased to £10,600 and the tax code for use will be 1060L.
As a result there will be a general uplift of tax codes with suffix ‘L’ which will be increased by 60. HMRC will also issue individual tax codes for the tax year starting 6 April 2015 for some employees and employers should receive by the end of March 2015.
Income Tax bands and rates
The income tax rates and income tax bandwidths for the tax year starting 6 April 2015 are shown below:
|Basic Rate||20%||£0 to £31,785|
|Higher Rate||40%||£31,785.01 to £150,000|
|Additional Rate||45%||£150,000.01 and above|
Under changes in the 2014 Autumn Statement, personal tax allowances can be shared between spouses (provided they have not used them). The person with the lower income can share their tax allowance with their spouse who has the higher earnings.
For the 2015 to 2016 tax year £1,060 will be transferable, representing a saving of up to £212 per year for eligible couples. Two new tax code suffixes will be introduced (an ‘N’ suffix for the ‘transferor’ and an ‘M’ suffix for the ‘recipient’) in order to facilitate the transferable allowance for those PAYE customers currently on an ‘L’ suffix code. The new tax code suffixes ‘M’ & ‘N’ will operate in exactly the same way as the existing suffix codes ‘L’, ‘P’, ‘T’ and ‘Y’. These new tax suffixes will not be used on tax codes prior to April 2015 and so will not be included on the 2015 to 2016 P9 tax codes issued.
National Insurance contributions (NICs) earnings limits and thresholds
…The main rate of primary Class 1 NICs will remain unchanged at 12%
…The Class 1 secondary rate of NICs will remain unchanged at 13.8%. This rate also applies to Class 1A and Class 1B NICs
…The additional rate of primary Class 1 NICs will remain unchanged at 2%
…The Lower Earnings Limit will be £112 per week
…The Primary Threshold (for employees) will be £155 per week
…The Secondary Threshold (for employers) will be £156 per week
…The Upper Accrual Point will remain unchanged at £770 per week
…The Upper Earnings Limit (UEL) will change to £815 per week
…The new Upper Secondary Threshold (for employers) will be £815 per week*.
…Contracted out rebate percentages for Contracted-out Salary Related (COSR) Schemes will remain unchanged at 3.4% for employers and 1.4% for employees.
*This has been introduced to facilitate the abolition of employer NICs for employees under the age of 21 from 6 April 2015, when employers will no longer be required to pay Class 1 Secondary NICs on earnings paid up to the Upper Secondary Threshold to any employee under the age of 21. The following NI Codes have being created:
M (replacing A) – Not contracted-out standard rate contributions for under 21
Z (replacing J) – Not contracted-out deferred rate contributions for under 21
I (replacing D) – Contracted-out Salary Related standard rate contributions for under 21
K (replacing L)– Contracted-out Salary Related deferred rate contributions for under 21
If the suffix is not changed, the employer will continue to pay contributions. The current suffixes A, J, D and L will still be applicable for those 21 years and above.
From 6 April 2015 the student loan threshold will rise by 2.5% to £17,335. This figure will apply to all current borrowers for whom employers make Student Loan deductions.
New Statutory Payments Rates
…The Statutory Sick pay rate will increase from £87.55 to £88.45.
…The standard rate of Statutory Maternity Pay, Adoption Pay and Paternity Pay will increase from £138.18 to £139.58.
…The rate of the new Statutory Shared Parental Pay will also be £139.58.
The general rate at which employers can recover Statutory Maternity, Adoption, Paternity and Shared Parental Pay from HMRC will remain 92%. Small employers will continue to be able to recover 100% plus an additional compensation rate. The additional compensation rate will remain at 3%.
Shared Parental Leave and Pay
New legislation comes into force regarding the statutory pay and leave entitlements available to employed parents. For babies due or children matched or placed for adoption on or after 5 April 2015, a new entitlement of Shared Parental Pay and Leave (ShPP/SPL) will replace Additional Statutory Paternity Pay and Leave (ASPP/APL). The parents of babies due or children matched for adoption on or before 4 April 2015 will continue to be eligible for ASPP and APL.
The introduction of Shared Parental Leave means parents will have greater choice in how they share the care of their child and time off work in the first year of their child’s life. Under the new rules, mothers will still take at least two weeks of maternity leave immediately after birth (four weeks for factory workers), but after that working couples can share up to 50 weeks of leave and up to 37 weeks of pay.
The current entitlement to 52 weeks statutory maternity/adoption leave, 39 of which is paid, and two weeks of statutory paternity leave and pay is all unchanged. However, the first six weeks of Statutory Adoption Pay will increase to 90% of average weekly earnings to bring it in line with Statutory Maternity Pay.
Parents will be able to take their leave simultaneously so that they can spend time at home together with their child or they could opt to take it in phases, for example 20 weeks for the mother/adopter, followed by 20 weeks for the father/partner, followed by 10 weeks for the mother/adopter. So it may be the case that statutory parental pay is paid over one or two discontinuous periods. Parents must notify their employers of their plans to take SPL eight weeks before they become eligible for it, and all shared leave and pay must be taken between the baby’s birth and the child’s first birthday or within one year of adoption.
If the baby is born early parents will still be eligible for Shared Parental Leave and Pay providing the baby was due on or after 5 April 2015.
Entitlement for Statutory Adoption Pay remains as it was, and you need to have a 26-week continuous employment requirement. From 5th April 2015 the requirements to take Statutory Adoption Leave will be available from day one of employment. There is no longer a 26- week continuous employment requirement.
Eligible businesses and charities reduced their Employer Class 1 National Insurance contributions (NICs) bill by up to £2,000 in 2014-15 by claiming the new Employment Allowance. This will continue in 2015-16; so, if you are already claiming, you don’t need to take any further action.
Filing penalties started on 6 March 2015 for PAYE schemes with 49 or fewer employees From 6 March 2015, all employers may incur a penalty for each tax month in which one or more real-time PAYE reports for a scheme are late.
HMRC will issue notices in late May 2015 for penalties incurred. Penalties can be between £100 and £400 per month depending on the number of employees in the scheme. Where an FPS is outstanding for three months or more HMRC may charge a further penalty of 5% of the tax/NICs that would have been paid if the information it provides had been sent on time.
Other budget changes – reminders
Fuel benefit charge
From 6 April 2015, the fuel benefit charge multiplier used to calculate the tax payable on the benefit of free fuel for company cars will increase from £21,700 to £22,100.
Van and Van fuel benefit
From 6 April 2015, the van benefit is increased from £3,090 to £3,150 for 2015 to 2016 and the van fuel benefit charge will increase from £581 to £594.
Employee vehicles: mileage payments for business travel
No change for 2015-16; rate per business mile:
Cars: 45p for the first 10,000 business miles in a tax year, then 25p for each subsequent mile