What does the 2019/2020 tax year look like for payroll?

Payslips – New Legislation

New payslip legislation will come into force from April 2019.  The legislation will require all employers to provide a payslip to all ‘workers’ and to show hours on payslips where their pay varies by the amount of time worked. 

Who is a ‘worker’? 

There is a link provided within the minimalistic guidance (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/764576/payslips-legislation-april-2019-additional-info-on-payslips.pdf)  to the GOV.UK website about what is deemed a worker and reference made to contact ACAS if you are unsure.  Having looked at the employment status/worker site I found, in my view, that unless they are self-employed you will need to provide a person with a payslip.  Will this apply to the future “Off Payrolling” rules when they come into force?  Will they be classed as a worker for this legislation or not? The detail on this new legislation is yet to be released so it will be “watch this space”

Hours being shown

This applies to those individuals whose pay varies depending on the number of hours/days they actually work; so not standard basic wages or salaries, however you will need to show any overtime worked, where not part of their salary or basic wage, and include the amount paid.  The guidance does state you can show the hours as a total paid in the pay period or you can break them down into the different rates.   Interestingly the guidance says the hours that must be shown on the payslip are a different matter to the number of hours worked for NMW/NLW purposes - I will leave you to your own thoughts on this! The guidance has however stated that if for example a person is salaried and a fixed monthly amount is paid, if they take leave or go sick, then you don’t need to show hours worked. 

Now to my main concern with either the legislation itself, or the way in which the guidance is written.  On page 4 it says “it should be clear which pay period they were worked in”.  Does this mean payroll will need to put dates on the payslip for the hours?  For those workers who are paid in arrears or paid overtime which, unless contractual, will always likely be in arrears, will your payroll software be able to do this and more importantly will your payslip fit this on?  Further clarification is needed on this point and I have asked my professional body, The Chartered Institute of Payroll Professionals to look into it too.  The guidance does provide some limited scenarios which include:

  • Salaried workers with no variable pay
  • A salaried worker with additional variable pay
  • A worker paid by the hour
  • A worker paid by the hour with additional pay for unsociable hours
  • Term-time workers
  • Day rate workers
  • A salaried worker who has unpaid leave
  • An hourly worker on sick pay

Consultation on salary sacrifice and National Minimum Wage (NMW) & National Living Wage (NLW)

Staying with NMW and NLW there is an interesting consultation out that closes on 1 March, which is looking at the relationship between salary sacrifice schemes and the NMW/NLW legislation and, in addition, the different pay frequencies operated.  Currently as employers will be aware, an employee cannot enter into a salary sacrifice arrangement if, by doing so, it would reduce their hourly rate to below NMW/NLW.  There are a number of questions around pay frequencies and the document is asking for views.  At present there is an annual average method for salaried workers but it is based on the start date of the employee rather than, for example, the tax year, and only allows for monthly and weekly paid employees.  In today’s world people are paid fortnightly, 4-weekly, daily, lunar monthly etc. so all will need to be included if employers are to comply.  I am curious as to whether employers even realise there are only two pay frequencies included in the legislation!

Now to the salary sacrifice part.  The consultation is seeking examples and views on the impact of the current legislation which, as stated above, prohibits workers entering the scheme if it would take them below the NMW.  More employers are offering pension salary sacrifice schemes and it is a detriment to those employees who cannot benefit from the NICs savings - all because their pay is at NMW - and with this rate consistently rising, I believe more employees will either not be allowed to enter the scheme, or will need to be taken out of the scheme; surely this is unfair?

To respond to the consultation you can find it on the following link - https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/765127/salaried-hours-work-and-salary-sacrifice-consultation.pdf

April 2019 NMW/NLW rates

  • 25yrs plus -  ££8.21
  • 21yrs to 24yrs - £7.70
  • 18yrs to 20yrs  - £6.15
  • 16yrs to 17yrs £ - 4.35
  • Apprentice rate - £3.90

Goodbye to the Earlier Year Update (EYU)

From April 2020 the EYU will cease to be valid for any real time information submissions after this date.  Instead, employers will be able to submit a Full Payment Submission (FPS) to correct the payroll figures reported on the final FPS.  HMRC has extended the legislation to permit employers, where software allows, to commence this process from 20th April 2019.  The current EYU means employers report the difference between what was reported pre 19th April and what should have been reported.  By submitting another FPS it means the data HMRC holds will be replaced, rather than the difference.  This has been campaigned for by the payroll industry and will improve accuracy rates in HMRC records; an example of HMRC listening to the payroll industry. The planned timetable is as follows:

  • Amendments to the Tax Year ending 05 April 2019 from 20 April 2019 – an EYU or FPS will be accepted. This is to be a pilot year and the use of the FPS after the year-end will be voluntary.
  • Amendments to the Tax Year ending 05 April 2020 (and future years) from 20 April 2020 – will be made by the submission of an FPS
  • Amendments to Tax Years ending 05 April 2018 and earlier – will be made by the submission on an EYU

Company cars and OpRA amendments

This legislation addresses two anomalies in the April 2017 Optional Remuneration Arrangements (OpRA) rules, by introducing legislation to:

  • Ensure that when a taxable car or van is provided through OpRA, the amount foregone, which is taken into account in working out the taxable benefit in kind, includes any amount foregone in connection with associated costs (such as insurance and servicing); and
  • Adjust the value of any capital contribution towards a taxable car when the car is made available for only part of the tax year.

Staying with benefits in kind the following new rates will apply:

  • Company car fuel calculator rises to £24,100; and
  • Vans to £655 with a van charge for personal use rising to £3,430

Company car tax diesel supplement

As announced in April 2018 the new fuel type F should be shown on the P46(Car) or within the reporting for payrolling of benefits, where the diesel car meets the Euro Standard 6d.  HMRC’s online car calculator will have this included from April 2019.

Welsh Rate of Income Tax (WRIT)

For any employers who employ someone living in Wales please ensure, upon receipt of the tax code notification, you apply the prefix C.  The Welsh government has confirmed there will be changes to rates for the 2019/2020 tax year.  Unlike Scotland, Wales only has the devolved power to change the percentage rates and not the bands.

Automatic enrolment contribution increases

From April 2019 the percentages for both employers and employees reaches the final stage.  This means employers must contribute a minimum of 3% and employees 5%.  Employers can take some of the hit for employees for example 4% and 4% as long as the total contributions being paid into the employee’s pension is a minimum of 8%.  Also please remember to write to your employees to advise them of the changes.  More information can be found on The Pension Regulators website which includes a template - https://www.thepensionsregulator.gov.uk/en/employers/increase-of-automatic-enrolment-contributions/what-do-i-need-to-do-to-set-up-these-increases

If you have any questions for Karen regarding your payroll or the upcoming changes to payroll legislation, get in touch on 07825 561028 or email at karen.thomson@armstrongwatson.co.uk.

Contact Karen

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