Payroll Year-end - Ellie Hammett looks at the changes ahead
With the payroll year-end fast approaching, now is the time to get your employee records up to date, in readiness for the new tax year.
Changes to personal allowance
If you are an employer, you need to report relevant details to HMRC on the current 2017/18 tax year and prepare for the new tax year, which starts on 6 April 2018. Each tax year stands alone for the purposes of National Insurance Contributions, Income Tax and the processing of PAYE.
The tax-free personal allowance increases to £11,850 on 6 April 2018, and it is therefore essential that all employee tax codes be updated, using the following points system:
- 35 points to any tax code ending in ‘L’, e.g. 1150L becomes 1185L (this is also the emergency tax code for 2018/19)
- 39 points to any tax code ending in M
- 31 to any tax code ending in N
Note, any week 1 or month 1 markings in a tax code can be removed when rolling into the new tax year.
If an employee has been issued a tax code, usually by post, from HMRC, then this issued code is to be used, rather than the points system above.
If you have previously claimed the Employment Allowance, which will remain at £3,000 for the 2018/19 tax year, then please ensure that this is still being claimed on your payroll software, and that you are in fact still eligible to claim the allowance.
Auto enrolment duties
Those employers who have auto enrolment duties, will now hopefully all be familiar with the process and are regularly paying into their workplace pension schemes.
Initially, the minimum contribution was 2% of qualifying earnings, with at least 1% being paid by the employer. However, from April 2018, this is increasing to contributions of 5% of qualifying earnings, of which at least 2% must be paid by the employer. Please be sure to update your payroll records when April arrives.
Please also remember to increase the hourly rate of any employees to at least the following:
Don't forget, it is a criminal offence to employ someone without paying him or her the national minimum wage, so you need to review the minimum wage rated for any employees under 25 following each birthday.
The content of this article is for general information only and does not constitute tax advice. It should not be relied upon and action which could affect your business should not be taken without appropriate professional advice.
Ellie Hammett ACCA
Ellie started with Evolution ABS in April 2010, gained her AAT qualification in September 2012 and fully qualified as a Chartered Certified accountant in December 2015. Ellie now manages a portfolio of mainly agricultural clients.
Ellie grew up on her parents’ dairy farm in Dorset, before moving to Devon in 1998. She now lives with her husband on his family beef and sheep farm in East Devon.
In her spare time, Ellie enjoys helping out on the farm (although not so much the night time lambing) and used to be an active member of Whimple and Broadclyst Young Farmers Club, competing in speaking competitions, drama and showing stock.