If we hoped that the process of leaving the European Union would mean less changes to payroll in the 2018-19 tax year, then we were to be seriously disappointed.
We previously looked at how payrollers should prepare for this new tax year.
Payroll has yet again become subject to more change, which means more reading and knowledge updating for the payroller. This is great for meeting the AAT CPD requirements, but means less time for administration and the general tidying up that is needed after every pay cycle.
So, to help with the implementation of the 2018-19 tax year here are a few of the most likely changes that the payroller will need to apply.
The new rates and thresholds
Scotland has been given the power to set the tax rates and thresholds for Scottish residents. However, allowances such as the Personal Allowance (PA) of £11,850 and Marriage Allowance (MA) of £1,190 are still UK wide (rUK) as are the Employer-Supported Childcare (vouchers) earnings assessment and the Automatic Enrolment Qualifying Earnings Band (QEB) higher level. So that’s a little less to worry about.
The Chancellor did however make a change to the transfer of the Marriage Allowance. With effect from 29 November 2017 the Marriage Allowance can be transferred to/from the deceased spouse or civil partner. A claim can also be backdated up to four years.
This option may be worth communicating to employees at the start of this tax year, perhaps along with their P60 paperwork. To wait until an employee’s spouse or partner has died may not be the best time to remind the employee of this change; a blanket notification alerting all employees to the option will be more suitable, so get a short memo typed up now.
The tax codes
Now onto the emergency tax codes for 2018-19. They are
- (S)1185L W1, (S)1185L M1 and (S)1185L X.
The Scottish tax codes for the Scottish tax bands are
- SD0 for the intermediate rate tax (21%)
- SD1 for the higher rate tax (41%)
- SD2 for the top rate tax (46%)
HMRC will determine and notify the payroll provider of which tax code to use, and of any changes to the employees’ tax codes during tax year.
The new Scottish tax rates and bands will affect PAYE Settlement Agreements and as such separate calculations and records will need to be kept.
Fortunately, the Scottish Basic rate still matches rUK so pensions Relief At Source is unaffected.
Minimum wage and apprentices
Before leaving the rates section a final word on the minimum wage and apprentice rate interplay. Every month the payroller must review the date of birth of all employees for automatic enrolment purposes, and also to check that the employee is on the correct minimum wage rate. A further check should also be done to identify any apprentices that have just completed, or are due to complete, the first year of their apprenticeship in the pay period. These apprentices, after the first year of their apprenticeship should be placed on the minimum wage rate pertaining to their age as the apprentice rate is for the first year only and should not be used beyond then.
Apart from the usual tax year / date changes and following the optional remuneration arrangement changes from April 2017, changes to the form itself includes new fields for ‘or Amount Forgone’ or ‘or Relevant Amount’ and P46(Car) has a new ‘cash forgone’ field.
There is also a new Working Sheet 2b for car and car fuel provided through an optional remuneration arrangement.
There may be a need to report any passenger mileage payments that are made in excess of the exemption. Up to and including 2016-17, Box E was used for mileage allowance payments and passenger mileage payments. The 2017-18 form and Guide however say that Box E is for mileage allowance payments only and passenger payments are not mentioned at all. Therefore, if passenger mileage payments are to be reported, use Box M (the second line that is not marked for Class 1A NICs).
The tax treatment of termination payments changed from April 2018 and applies to all payments made on or after 6 April 2018. The changes include
- the distinction between contractual and non-contractual PILON has been removed
- all basic earnings above the £30,000 exemption are taxable.
- new terminology including ‘termination award’, ‘post-employment notice pay’, ‘trigger date’.
- a prescribed calculation for ‘post-employment notice pay’.
- the exemption for foreign service is removed.
- the exemption for injury payments does not apply to payment for injury to feelings.
There is more change scheduled to start April 2019 and that is that termination payments in excess of £30,000 will be subject to employer NICs (Class 1A).
Changes to RTI specification from April 2018 include
In the FPS.
- Car and car fuel fields now mandatory if payrolling
- ‘Serious ill health lump sum indicator’ now mandatory
- Student Loan Plan Type field added. In the FPS and EPS
The Electronic Data Interchange (EDI) will be withdrawn from 20 April 2018
These are some of the changes due this tax year. The next blog will cover the changes to statutory pay, apprenticeship administration and pensions. Champagne anyone?
Julie Hodgskin is a fellow member of AAT, runs a licensed accounting practice and is a technical materials author for CIPP.