April welcomes in the new tax year and it's essential to know and understand some of the key changes in the 2019-20 PAYE rules.
Perhaps this year’s changes aren't as big in comparison to previous years, yet there are still enough kinks in the system to risk misunderstandings occurring.
Increased NLW and NMW rates
The biggest payroll changes taking effect from 6 April 2019 are increases in the National Living Wage (NLW) and National Minimum Wage (NMW) rates introduced in the 2018 Budget. The minimum hourly rates have increased for both national wage levels:
Workers of ages 25 or over - £7.83 to £8.21
Workers of ages 21 to 24 - £7.38 to £7.70
Workers of ages 18 to 20 - £5.90 to £6.15
Workers who are over compulsory school age but not yet 18 - £4.20 to £4.35.
Apprentices under the age of 19 - £3.70 to £3.90.
All of these rates should be written into annual payroll upgrades, but it’s worth checking if any of these rates apply to your employees or clients.
Auto-enrolment contribution increases
As part of a phased approach, minimum contributions for auto enrolment pensions went up on 6 April for both employers and employees. Employers are now required to contribute a minimum of 3% of pay and employees must add their own 5% contribution (up from 3%).
Situations may apply where the employer has been contributing more than the old minimum, but less than the new rate. Failing to update schemes to the correct contribution rates will disqualify them from being used for automatic enrolment.
From 6 April 2019, those working on zero-hour contracts were granted a legal right to receive a payslip showing their hours worked. All employees are now required to receive a payslip when they get paid, but that does not extend to non-employee contractors and freelancers, nor police employees, merchant seamen and fishing vessel crew.
In line with the real time information (RTI) rules, payslips must be provided on or before the employee’s payday in either electronic or printed formats, showing:
Deductions for fixed amounts should be detailed, but this can be on a separate document/statement. These statements should be issued before the first payment to a new employee and annually after that to employees subject to any fixed deductions.
Welsh rate of income tax
From April 2019, the UK government reduced the income tax rates in Wales and granted the Welsh Government authority to set income tax rates to be paid by Welsh taxpayers. The UK Government will continue to collect income tax the same way it is now and the same allowances apply.
For the 2019/20 tax year, the National Assembly for Wales agreed rates that match the current UK rates. While there will be no change to overall income tax rates for Welsh taxpayers this year, that could change in the future – as the increased Scottish income tax rates have done this year.
The Usual Suspects
The 2019/20 PAYE rates, thresholds, triggers and calculations have all changed for PAYE tax, national insurance contributions, student loan deductions, statutory sick pay, statutory maternity pay, statutory adoption pay, statutory paternity pay, statutory shared parental pay, company cars, vans and fuel.
From April 2019, employers could also receive instructions from HMRC to deduct repayments for postgraduate loans for employees.
There were updates to many of the standard forms including P11, P45, P60, P30, P32, P11D and PBIK forms. The emergency tax code has changed from 1185L to 1250L. When importing from the previous tax year, L codes are uplifted by 65, M codes are uplifted by 71 and N codes by 59.
Eligible employers can continue to claim the £3,000 employment allowance which can be used to reduce employer class 1 secondary NIC payments to HMRC.