New tax year changes & Coronavirus

March 13, 2020 admin No comments exist

This is a very busy time of year normally with the new tax year; Coronavirus adds another layer of complexity. Here’s how it will affect payroll matters:

Coronavirus

  1. Advice for businesses.

Advice from ACAS & Gov.uk: In case coronavirus (COVID-19) spreads more widely in the UK, employers should consider some simple steps to help protect the health and safety of staff.

It’s good practice for employers to:

  • keep everyone updated on actions being taken to reduce risks of exposure in the workplace
  • make sure everyone’s contact numbers and emergency contact details are up to date
  • make sure managers know how to spot symptoms of coronavirus and are clear on any relevant processes, for example sickness reporting and sick pay, and procedures in case someone in the workplace shows symptoms of the virus
  • make sure there are clean places to wash hands with hot water and soap, and encourage everyone to wash their hands regularly
  • provide hand sanitiser and tissues for staff, and encourage them to use them
  • reconsider any travel to affected areas

Your employee will be advised to isolate themselves and not to work in contact with other people by NHS 111 or PHE if they are a carrier of, or have been in contact with, an infectious or contagious disease, such as COVID-19.

The government strongly suggest that employers use their discretion around the need for medical evidence for a period of absence where an employee is advised to stay at home due to suspected COVID-19, in accordance with the public health advice being issued by the government. If the employee is in isolation they may not be able to provide a sick note (‘fit note’).

If an employee is not sick but their employer tells them not to come to work, they should get their usual pay.

  • Support for people announced in the Budget

The following was advised in the government fact sheet: Budget 2020 Support for those affected by COVID-19.

  • Statutory Sick Pay (SSP) will now be available for eligible individuals diagnosed with COVID-19 or those who are unable to work because they are self-isolating in line with Government advice. This is in addition to the change announced by the Prime Minister that SSP will be payable from day 1 instead of day 4 for affected individuals.
  • People who are advised to self-isolate for COVID-19 will soon be able to obtain an alternative to the fit note to cover this by contacting NHS 111, rather than visiting a doctor. This can be used by employees where their employers require evidence. Further details will be confirmed shortly.
  • Those who are not eligible for SSP, for example the self-employed or people earning below the Lower Earnings Limit of £118 per week, can now more easily make a claim for Universal Credit or Contributory Employment and Support Allowance:
    • For the duration of the outbreak, the requirements of the Universal Credit Minimum Income Floor will be temporarily relaxed for those who have COVID-19 or are self-isolating according to government advice, ensuring self-employed claimants will receive support.
    • People will be able to claim Universal Credit and access advance payments upfront without the current requirement to attend a jobcentre if they are advised to self-isolate.
    • Contributory Employment and Support Allowance will be payable, at a rate of £73.10 a week if you are over 25, for eligible people affected by COVID-19 or self-isolating in line with advice from Day 1 of sickness, rather than Day 8.
  • The government has announced a new £500 million Hardship Fund so Local Authorities can support economically vulnerable people and households. The government expects most of this funding to be used to provide more council tax relief, either through existing Local Council Tax Support schemes, or through similar measures. MHCLG will set out more detail on this funding, including allocations, shortly.
  • Support for businesses experiencing increases in costs or financial disruptions
  • The government will bring forward legislation to allow small- and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. The eligibility criteria for the scheme will be as follows:
  • This refund will cover up to two weeks’ SSP per eligible employee who has been off work because of COVID-19.
    • Employers with fewer than 250 employees will be eligible. The size of an employer will be determined by the number of people they employed as of 28 February 2020.
    • Employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19.
    • Employers should maintain records of staff absences, but employees will not need to provide a GP fit note.
    • The eligible period for the scheme will commence the day after the regulations on the extension of Statutory Sick Pay to self-isolators comes into force.
    • The government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible. Existing systems are not designed to facilitate employer refunds for SSP.

Details of further help can be found here:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/871900/Covid-19_Budget_fact_sheet_FINAL.pdf.

Tax year 2020 – 21

  1. New tax thresholds

The Personal Allowance remains at £12,500 per annum, meaning that no tax is paid on wages up to this figure, £1,042 per month or £240 per week.

There are three tax bands for earnings above £12,500:

Basic Rate                 20% on £1 – £37,500 (i.e. for total earnings £12,501 – £37,500)

Higher Rate               40% on £37,501 – £150,000 and

Additional Rate         45% on £151,001 and above.

These remain the same as last year.

  • New tax codes

Form P9X (2019) from HMRC gives the tax codes to use from 6th April 2020.

The codes remain the same as the previous tax year.

  • National Insurance

The Class 1 National Insurance thresholds are also increasing.

The lower earnings limit (LEL) is the point at which you can claim qualifying years for the state pension but NI rate is 0%. For 2020 – 21 it is £6,240 per year. If you employ someone and pay them this amount or more you have to register for PAYE.

The Primary Threshold is where the employee starts paying NI and the Secondary Threshold is where the employer starts paying NI.

The bands are:

Threshold Pay per week Pay per month Pay per annum Rate (category letter A)
Lower earnings limit (LEL) £120 £520 £6,240 0%
Primary Threshold (PT) £183 £792 £9,500 20%
Secondary Threshold (ST) £169 £732 £8,788 20%
Upper Secondary Threshold (under 21) (UST) £962 £4,167 £50,000 2%
Apprentice UST (AUST) £962 £4,167 £50,000 2%
Upper Earnings Limit (UEL) £962 £4,167 £50,000 2%
         

Employers National Insurance (for category letter A) is 0.00% for earnings at or above LEL up and including ST.

For earnings above ST up to and including UEL/ UST/ AUST, it is 13.80%

The Employers National Insurance Allowance increases from £3,000 to £4,000 per year. You are only eligible if your total Class 1 NICs liability is below £100,00 in the tax year before the year of claim. It will also start to operate as de minimis state aid.

  •  National Minimum Wage

The national minimum wage goes up on 1st April:

Year 25 and over 21 to 24 18 to 20 Under 18 Apprentice
April 2019 (current rate) £8.21 £7.70 £6.15 £4.35 £3.90
April 2020 £8.72 £8.20 £6.45 £4.55 £4.15
           
Increase 6.21% 6.49% 4.88% 4.60% 6.41%

Almost all workers are entitled to it by law. HMRC detail the exceptions.

  •  The Workplace Pension

The contribution rates for both employers and employees remain the same. There are currently no plans for future increases.

The employer’s contribution is 3.0% and

The employee’s contribution is 5.0%.

This gives a minimum total of 8.0%. However, should the employer pay more, say 4.0% then the employee, should they wish, could pay less, say 4.0% and still maintain the 8.0% minimum. Both employer and employee can pay more than the minimum.

Hopefully this has been of use as a checklist of things to do. It is not comprehensive and you should check on statutory sick pay, maternity & paternity pay, student loans, etc. as appropriate.

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