In this article we summarise the key changes that employers should be aware of from 6th April 2018.
Most businesses and charities qualify for the Employment Allowance, which is offset against the employer's National Insurance bill. The allowance is designed to help small businesses who want to hire their first employee or expand their workforce.
The 2018/19 employment allowance is set to stay the same for 2017/18, at £3,000.
But this is in addition to the National Insurance breaks for staff earning under the Secondary Threshold (set at £892 per week for 2018/19) and aged under 21 or apprentices under the age of 25.
Employees and Employers National Insurance
The point at which employees and employers start paying National Insurance continue to be aligned in 2018/19 but the threshold rises to £162 per week.
Scotland - tax rates 2018/19
In December, the Scottish Government published its Draft Budget for 2018/19 and within it announced plans for five different rates of income tax. The intermediate band was subsequently altered on 31st January.
|19%||on annual earnings above the PAYE tax threshold and up to £13,850|
|20%||on annual earnings from £13,850 - £24,000|
|Scottish intermediate tax rate||21%||on annual earnings from £24,000 - £43,430|
|41%||on annual earnings from £43,430 to £150,000|
|46%||on annual earnings above £150,000|
If you're using payroll software or a payroll bureau, make sure they're equipped to handle the new rates.
Scottish taxpayers paying into a pension will be keen to hear what happens if they receive tax relief for their pension contributions under a 'relief at source' basis. This is where contributions are taken from net pay, and then the pension scheme claims the tax relief from HMRC, which is then added to the pension pot.
Please note, that the Scottish Income Tax rates and thresholds are subject to Scottish parliamentary approval so may change.
National Insurance will continue to remain under Westminster's jurisdiction.
Personal Allowance and Tax Code 2018/19
The personal allowance for 2018/19 rises to £11,850 from £11,500 in 2017/18. This should mean most employees have a tax code of 1185L unless they have less straightforward circumstances, such as adjustments in their tax code or multiple jobs/ pensions.
The responsibility for defining the income tax base, including the setting or changing of income tax reliefs and exemptions (including the Personal Allowance), continues to rest with the UK Government. Therefore, the Personal Allowance is the same for all UK taxpayers.
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 enroll their eligible staff into pension schemes.
The contribution levels will also gradually increase, and in April 2018 they will rise:
|Date||Employer minimum contribution||Total minimum contribution|
|Employer's staging date to 5th April 2018||1%||2%|
|6th April 2018 – 5th April 2019||2%||5%|
|6th April 2019 onwards||3%||8%|
Company cars are made available for private use by the employer to their staff or directors. The employee/ director is taxed on the value of the car, called a 'benefit in kind'. The benefit in kind for cars, is typically the car's list price multiplied by a percentage, which is normally dictated by the car's fuel type and CO2 emissions.
In a bid to discourage gas-guzzlers, from April 2019, the percentages applied will increase by 3% across the board*. This will mean a larger tax bill for the employees and more National Insurance for the employers.
While this is some time away, it's useful to know now as it may influence what cars are purchased this year. 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
This list isn't comprehensive, but 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
- Make sure any Scottish taxpayers have been identified on the payroll and that payroll processes are equipped to handle the tax calculations for Scottish taxpayers
- 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
- Could fleet be changed for cars with lower emissions? If not, make sure budgets are updated for higher National Insurance liability for 2019/20+
We can help
If you would like to concentrate on running the business, we can assist you with complying with your duties as an employer.
Our payroll software is RTI-compliant and we’re able to offer our clients access to a pension scheme that is ready for auto enrolment. Needless to say, we can manage your day-today payroll requirements - even if your employees are on sick, maternity or paternity leave. We’ll also handle the payroll year end for you, including any benefits and expenses forms due.
Call us today on 0800 0523 555 or use our online contact form to find out more about our services for employers and how they can benefit your business on 0800 0523 555.
By Jo Nockels FCCA
Last updated February 2018
Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's 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 information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.