New for 2016-17
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There are various data-item and rule changes for 2016-17 and this guide provides details of some of them. We would recommend that you read the latest HMRC Employer Bulletin (www.hmrc.gov.uk/payerti/forms-updates/employer-bulletin/index.htm ) which covers many of these items in greater detail.
- Automatic Tax code increase to 1100L (uplift of L codes)
- The abolition of Employers NIC for Apprentices
- End of contracting out for NIC
- Increase of Employment Allowance
- Student Loans – Plan Type 1 and Plan Type 2
- Scottish Rate of Income Tax (SRIT)
- Payrolling Benefits in Kind (PBIK)
- National Living Wage
HMRC has announced a general ‘uplift’ of all tax codes with an ‘L’ suffix by 40. This means for example that an employee with tax code 1060L in 2015-16 will have their tax code uplifted by 40 from 6 April 2016 to 1100L. Payroll Manager applies this uplift automatically when you use the ‘create a file for next year’ feature. If you receive separate notifications from HMRC to change an employees tax code then you should action these accordingly.
The HMRC help sheet www.hmrc.gov.uk/helpsheets/p9x.pdf gives further guidance on 2016-17 Tax Codes.
From 6 April 2016 employers with apprentices under 25 years old will no longer have to pay Class 1 secondary National Insurance contributions (NICs) on earnings up to the “Apprentice Upper Secondary Threshold” (AUST) for those employees. The value of the AUST for the tax year 2016 to 2017 will be the same as the Upper Earnings Limit (UEL) which is £827/week, £3583/month, £43000/year.
If you have apprentices on the payroll then you should change their NI table letter on the ‘Pay Details’ screen from the first pay period of the year. An apprentice who is under 25 should now be assigned an NI table letter of H as follows:
- Select the appropriate employee on the ‘Pay Details’ screen and click on the ‘Basic’ tab.
- Double-click in the column marked ‘NI Let’ for the first pay period of the year (e.g. ‘wk1’, ‘pd1’ or ‘April’).
- Tick the box marked ‘The employee is a qualifying apprentice and aged under 25’. You will see (in bold) that the NIC letter used will be ‘H’.
- Tick the box marked ‘Apply this NI letter to the remainder of the year’ and click ‘OK’.
An apprentice with an NI table letter of H can earn up to £3583 per month before the employer must pay employers NIC. Please note that this change affects the employers NIC contribution only and does not reduce the amount of NIC that the employee pays.
Contracting-out of the additional State Pension will end on 5 April 2016, meaning that from 6 April employees will automatically be brought back in to the State Pension. If you had employees on the payroll that were previously contracted-out of the State Pension then they would have had their NIC calculated using NI table letters D, E, L, I or K in 2015-16. These NI letters are to be replaced by letters A, B, J, M and Z, and Payroll Manager will make this change automatically as you move from year 2015-16 to year 2016-17.
- employees previously on NI table letter D will be assigned table letter A
- employees previously on NI table letter E will be assigned table letter B
- employees previously on NI table letter L will be assigned table letter J
- employees previously on NI table letter I will be assigned table letter M
- employees previously on NI table letter K will be assigned table letter Z
From 6 April 2016 the Employment Allowance is increasing to £3000 (it was £2000 in 2015-16). If you claimed the Employment Allowance (to reduce the amount of employer NICs paid to HMRC) in 2015-2016 then Payroll Manager will ask if you wish to claim again for 2016-2017.
Please note that proposed legislative changes mean that some groups of employers (e.g. those where a single director is also the only employee) may no longer be eligible to claim the allowance. Moneysoft are not able to advise on whether or not an employer qualifies for the allowance – you should consult HMRC if you require further guidance.
From 6 April 2016 there will be two student loan plan types which will be known as Plan 1 and Plan 2. Each plan will have a different threshold (?17,495 for Plan 1, £21,000 for Plan 2). When HMRC sends notification to the employer to start making student loan deductions (via an ‘SL1 start notice’) they will indicate which of the plan types to use. Payroll Manager will be able to cater for each plan type from April 2016 and calculates the correct deductions automatically. You do not need to edit the details of any existing student loans.
For more information please refer to the HMRC guide on Repaying your student loan
From 6 April 2016 Scottish taxpayers will be issued with new tax codes prefixed with the letter ‘S’ (e.g S1100L). Please note that it is the responsibility of HMRC to identify ‘Scottish’ tax payers and not the responsibilty of the employer. For 2016-17 Scottish taxpayers will pay tax at the same rate as taxpayers elsewhere in the UK.
Payroll Manager is able to handle these new tax codes and report them correctly to HMRC via the RTI return.
For more information please refer to the HMRC guide on Scottish rate of Income Tax
Please also refer to the following guide on Changing an employee’s Tax Code within Payroll Manager.
From 6 April 2016 HMRC is introducing a voluntary framework to allow employers to ‘payroll’ most employee benefits in kind (BiKs). Payrolling is where the employer includes a notional value for employee BiKs as taxable pay into the regular payroll cycle. This means that the tax due on BiKs can be collected and paid in real time. Payroll Manager has been developed to allow users to take advantage of this new system if they wish to do so.
For more information about the payrolling of benefits please refer to the HMRC guide on Tax your employees’ benefits and expenses through your payroll
See the Moneysoft guide Payrolling Benefits in Kind (PBIK) for details of how to set this up within Payroll Manager.
8) National Living Wage
The new ‘National Living Wage’ is being introduced for workers aged 25 and over from April 2016. Please see HM Government – National Living Wage for further information. Payroll Manager contains features designed to help with this new legislation – please refer to our guide Minimum and Living Wage for more details.