New for 2020-21
There are a number of changes to the rules and regulations that will affect payroll for 2020-21 and this guide provides details of some of them. We would recommend that you read the latest editions of HMRC Employer Bulletin (www.hmrc.gov.uk/payerti/forms-updates/employer-bulletin/index.htm ) which cover many of these items in greater detail. Please also see the GOV.UK document Rates and thresholds for employers 2020-21 which gives details of National Insurance rates and thresholds, minimum wage rates, etc.
- Employment Allowance changes
- Employee Tax codes for 2020-21
- Income tax rates and thresholds in England, Northern Ireland, Wales and Scotland
- New rates of Statutory Pay
- National Minimum wage increases
- Student Loan rates and thresholds – Plan 1, Plan 2 and Postgraduate Loans
- Increase in reference period for holiday pay calculations
- Statutory Parental Bereavement Pay
- Company cars – zero emission miles.
- No change to Auto Enrolment minimum pension contributions
- Potential changes to the rules regarding the payment of Statutory Sick Pay
1. Employment Allowance changes
The rules regarding which businesses qualify for the Employment Allowance (EA) change from April 2020. The amount of the EA is also changing, and will be £4000 for 2020-21 (the EA was £3000 in 2019-20) . It is important that you understand these new rules before claiming the EA for 2020-21. Please refer to our guide on the Employment Allowance.
2. Employee Tax codes for 2020-21
In many previous tax years, HMRC have announced a general ‘uplift’ of tax codes in line with increases to the personal allowance (currently £12,500). For tax year 2020-21 the personal allowance remains at £12,500 for the whole of the UK, so there is no automatic uplift of tax codes. The ‘standard/emergency’ tax code for 2020-21 is 1250L (i.e the same as that for 2019-20).
The HMRC help sheet www.hmrc.gov.uk/helpsheets/p9x.pdf gives further guidance on Tax Codes.
3. Income tax rates and thresholds for 2020-21
The table below shows the income tax rates and thresholds in use for England, Wales and Northern Ireland (which remain the same as 2019-20) and also those for Scotland, which uses a different system of rates. There is a change to the thresholds for both the Scottish Starter Rate and Scottish Basic Rate of tax, which becomes operative from 11 May 2020. Payroll Manager will implement this change automatically.
|Income tax rates for England, Wales & Northern Ireland (annual earnings)|
|From 6 April 2020|
|Basic rate||20%||On earnings £12,500 to £50,000|
|Higher rate||40%||On earnings £50,001 to £150,000|
|Additional rate||45%||On earnings above £150,000|
|(Rates assume a personal allowance of £12,500)|
|Income tax rates for Scotland (annual earnings)|
|From 6 April 2020||From 11 May 2020|
|Scottish Starter rate||19%||On earnings £12,500 to £14,549||On earnings £12,500 to £14,585|
|Scottish Basic rate||20%||On earnings £14,549 to £24,944||On earnings £14,585 to £25,158|
|Scottish Intermediate rate||21%||On earnings £24,944 to £43,430||On earnings £25,158 to £43,430|
|Scottish Higher rate||41%||On earnings £43,430 to £150,000||On earnings £43,430 to £150,000|
|Scottish Top rate||46%||On earnings above £150,000||On earnings above £150,000|
|(Rates assume a personal allowance of £12,500)|
Payroll Manager will automatically apply the correct rate/ threshold for income tax according to the tax code assigned to each employee.
4. New rates of Statutory Pay
- The rate for Statutory Sick Pay (SSP) is £95.85 per week from 6 April 2020 (the weekly rate was £94.25 in 2019-20).
- The standard rate of Statutory Maternity, Paternity and Adoption Pay (SMP, SPP, SAP) is £151.20 from April 2020 (the weekly rate was £148.68 in 2019-20).
- The Lower Earnings Limit (LEL) for 2020-21 (i.e. the minimum amount an employee must earn in order to qualify for SSP, SMP etc) is £120.00 (the LEL for 2019-20 was £118)
See the HMRC publication Rates and Thresholds for 2020-21 for more information.
Payroll Manager will automatically apply the correct rate of statutory pay.
5. National Minimum Wage increases.
The National Minimum wage rates are increasing from April 2020. Payroll Manager does not automatically update these rates, so if you have employees that are subject to these minimums you should ensure that the correct rate is being paid from April 2020 onwards. More information can be found on the link below:
6. Student loan rates and thresholds – Plan 1, Plan 2 and Postgraduate Loans.
From 6 April 2020 the threshold at which borrowers repay Student Loan Plan 1 (SLP1) loans will increase from £18,935 to £19,390 per year – Plan 1 loans are those issued to students before 2012. The rate remains at 9%.
The threshold for Student Loan Plan 2 loans (issued after 2012) will increase from £25,725 to £26,575 per year. The rate remains at 9%.
The threshold for Postgraduate Loans (PGL), remains at £21,000 per year, and the rate remains at 6%.
Payroll Manager will automatically apply the correct student loan repayment threshold and will include the correct plan type in the RTI details sent to HMRC. Please see our guide on Student Loan Deductions for details of how to process student loan repayments in the software.
For more information please refer to the HMRC guide on Repaying your student loan
Payroll Manager will automatically apply the correct rates of student and postgraduate loans.
7. Increase in reference period for holiday pay calculations
From 6 April 2020, the reference period used to calculate holiday pay for employees with variable hours is increasing for 12 week to 52 weeks. Payroll Manger does not automatically calculate holiday pay for such workers, but the software can be used to produce a number of reports which will help with the manual calculation. Please see our guide to Average Pay for Holiday Calculations.
8. Statutory Parental Bereavement Pay (SPBP)
The Government intends to introduce a new entitlement to Parental Bereavement Leave and Pay (SPBP) from April 2020. This will provide parents who lose a child or suffer a stillbirth with an employment right to take two weeks off work. Eligible parents will be entitled to two weeks statutory pay. Please see our Statutory Parental Bereavement Pay guide for more information.
9. Company Cars – Zero emission miles
For cars provided from 6 April 2020, the company car tax payable for hybrid cars with CO2 emissions in the range 1-50g/kg is related to the number of ‘Zero emission miles’ that the car can travel. Employers providing such cars to their employees will need to input the zero emission miles figure into Payroll Manager in order for the tax calculations to be correct. Please see our updated Car benefits – Data Input & Calculation 2020-21 guide for more information.
10. No change to Automatic Enrolment minimum pension contributions
The minimum contribution percentages relating to to Automatic Enrolment pension schemes have not changed for 2020-21, and remain at 5% for the employee and 3% for the employer. Payroll Manager will automatically carry forward these rates from the previous year.
11. Potential changes to the rules regarding the payment of Statutory Sick Pay
The Government has proposed changes to the rules regarding the payment of SSP to employees affected by the Coronavirus situation. Please refer to the GOV.UK website Coronavirus / COVID-19 guidance for employees, employers and businesses for the latest information. Our own guide on Statutory Sick Pay (SSP) has also been updated, and we will continue to add further information as and when this becomes available.
GOV.UK – Rates and Thresholds for 2020-21