As April approaches, so as ever does a raft of changes affecting payroll and PAYE. The changes on the horizon may impact upon the amount paid to employees as well as how you deal with National Insurance Contributions for contractors. Read on to find out what is changing, and how you need to prepare.
National Living Wage
The National Living Wage (NLW) in the minimum amount that employers have to pay staff aged 25 and over. From 1st April 2020, the statutory amount will rise from the current rate of £8.21 per hour to £8.72 per hour. These rates alter every April, although not quite as much as this year.
National Minimum Wage
The National Minimum Wage (NMW) varies according to an employee’s age, but workers must be at least school leaving age to qualify for it. A separate set of rates applies to apprentices.
From 1st April 2020, the following changes will come into effect:
- Employees aged 21-24 – NMW rises from £7.70 to £8.20 per hour
- Employees aged 18-20 – NMW rises from £6.15 to £6.45 per hour
- Employees under 18 – NMW rises from £4.35 to £4.55 per hour
- Apprentices – NMW rises from £3.90 to £4.15 per hour
IR35 – NOW MOVED BACK TO APRIL 2021
IR35, known as the off-payroll rule, allows HMRC to tax sole traders as employees if it considers the working arrangement as a regular employer-employee role.
The concern has always been that without IR35, off-payroll contractors hired as if they were regular staff are able to unfairly circumvent paying the same tax and National Insurance Contributions as their employed colleagues, even though they may be working in the same ways.
IR35 was applied to the public sector in April 2017, raising a significant £550 million increase in Income Tax and National Insurance in the first year alone. Originally from 6th April 2020 but now moved back to April 2021 in light of the coronavirus outbreak, IR35 will be rolled out within the private sector and will apply to services provided on or after that date, as opposed to when those services are paid for.
The responsibility for assessing IR35 status, and for making the tax and NIC deductions rests with the client rather than the contractor.
IR35 is a complex area and HMRC encourages businesses to use its online tool for both employers and contractors to check whether the rule applies. Be sure to make use of the tool for every contract and then print or save the results as evidence.
Need help keeping up with the changes?
If you are having trouble keeping up with the ever changing landscape of payroll and taxation, why not engage the services of a professional bookkeeper? Here at Office Assistants we help numerous businesses to keep on top of everything courtesy of a range of tailored services. To discover more about how we could help your business, please get in touch.