On April 5 2020, the 2019/20 tax year ends and on April 6 2020, the 2020/21 tax year begins.
There are a number of things you need to do to produce a successful payroll year end but the key things to remember are that you must:
- prepare for the new tax year (update employee payroll records. i.e. leavers, addresses etc.)
- report on the previous tax year to HMRC by April 19 2020
- provide your employee(s) with their P60 by May 31 2020
Those of you who have taken up a payroll service with us will not need to worry about doing this as we will be processing all information to HMRC and providing you with your P60’s. All we ask is that, if you have any new information regarding your employee’s employment status, to please let us know. This includes if they have been furloughed through the current crisis.
Below is key information regarding National Minimum Wage, Employment Allowance, National Insurance Contributions and Furlough Pay, for the tax year 2020/21, all of which has been released over the last few weeks by the Government.
National Minimum Wage
The rates applicable for the National Minimum Wage have increased for the 2020-21 tax year. The new rates, in comparison to the rates previous to April 1 2020 are listed below:
Previous rate: £8.21
New rate: £8.72
Previous rate: £7.70
New rate: £8.20
Previous rate: £6.15
New rate: £6.45
Previous rate: £4.35
New rate: £4.55
You will need to ensure that all your employees are paid at the above rates as an absolute minimum by law. When processing the payroll data for April, you will need to make sure you have reviewed pay for every employee and increased the hourly rates where necessary.
During the recent budget that was announced in March 2020, the employment allowance will be increased for the coming tax year from £3,000 to £4,000. This means that if you meet the eligibility criteria (set out below), you will be given relief of up to £4,000 per annum from the Employer’s Class 1 National Insurance Contributions.
- There are more staff on your payroll than just a director and one other employee
- Your employees are not employed for personal reasons (i.e, household or domestic work, nanny’s, gardeners etc)
- Your National Insurance Contributions did not exceed £100,000 for the 2019/20 tax year
National Insurance Contributions
In addition to the increase in the employment allowance, HMRC also confirmed during the recent budget announcement that the threshold for National Insurance (NI) Contributions will be increased from £8,632 to £9,500.
This means that you will not have to pay any NI contributions until your income exceeds £9,500.
In effect, you will see your net pay increase if you are expected to earn above the threshold during 2020-21.
Some of you may already know about the Governments recently announced Coronavirus Job Retention Scheme, and may even have begun to start processing furlough pay, but for those of you who are unsure what it all means or how it will work, we have included more detail below to help you understand.
The Coronavirus Job Retention Scheme was announced by the Government as a measure to minimise the financial impact on staff who may have otherwise been made redundant or laid off their current positions, as a result of the Coronavirus outbreak.
Employees of the following kind are entitled to receive 80% of their salary, which will be reimbursed by the Government:
- Full time employees
- Part time employees
- Employees on agency contracts
- Employees on flexible or zero-hour contracts
When processing the payroll for the coming month, you will need to only input 80% of the employees salary.
We are anticipating that the portal to input the payroll data to be recovered will be available towards the end of April. Once this portal is up and running, we will be able to input the employee salary information in order to claim the reimbursement. The data needed to input into the portal are as follows:
- Your PAYE reference number
- The number of employees being furloughed
- The claim period (start and end date)
- Amount claimed
- Bank account number and sort code
- Contact name
- Phone number
There is a lot of additional information available regarding the furlough pay on HMRC’s website: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
The information covers more specific topics such as those employees on statutory maternity pay, those on sick leave, as well as how to calculate the monthly salary for those employees on flexible or zero hours contracts.
PLEASE NOTE: If you have already taken up the payroll service with us, all of the above will be completed and sent over to each of you individually. If you have not taken up payroll with us but you feel you need extra support in this area, please let us know.
If you require any additional support regarding payroll, or would like more specific advice to your own circumstances, please contact us, we will be able to tailor the support specifically to your business.