Preparing for the new tax year – part 2

The first article in this series covered the statutory deduction rates for 2019-20 that apply to everyone who has an income in the UK. In this article more rates and updates are covered, all of which come into play in April 2019.

Rates

The following rates are reviewed annually, and many of them increase either in line with the retail price index, the consumer price index, or government policy.

The month of March is a good time to review all employee and worker dates of birth and diarise any rate increases due to them.

National minimum wage

The national minimum wage rate will increase 1 April. The new rates are

Be aware that for individuals whose age moves them from one rate to another and whose birthday falls on a day other than the first day of the month (and that is a lot of individuals) there may be two rates in the month to calculate, one rate for the days before the birthday, and one rate for after.

In the above situation it is worth reviewing the employment contract or Policy handbook for the correct procedure. If no written instructions, then check with the employer. Many employers will instruct the rate to be increased from the first of the month regardless of when the worker’s birthday falls.

Automatic enrolment

The qualifying earnings bands for 2019-20 are from £6,136 to £50,000. The earnings trigger remains at £10,000. This means that more and more people are falling within the automatic enrolment ‘net’.

This is the last year in which there is an increase in contributions (as far as we know). In the last tax year the total contribution was 5%, this has now been increased to 8%, with the employer paying a minimum of 3%. If workers have not yet been made aware of the increase this would be a good time to ‘remind’ people.

Remember that the increase is from 6 April, which may be in the middle of a pay period. Do check with the employer whether to implement the increase at the beginning of a pay period prior to the 6 April or from 6 April. An employer can always implement a rate increase early, though an employer may never delay or ignore an increase

Don’t forget that any business taking on their first worker will need to set up automatic enrolment immediately. The trigger date is the worker’s first day of work.

Redundancy

The new maximum weekly amount for redundancy or unfair dismissal for Great Britain has been announced and is £525 per week. The Northern Ireland rate to use, is £547 per week.

Operating PAYE

Most, if not every, tax year there are changes to the RTI process, associated documentation and the submissions used to report the pay. This tax year is no different

Submission changes

To allow for the notification of the deductions and changes announced during the year, various submissions have been amended.

For the 2019-20 tax year the Full Payment Submission (FPS) will now accept the ‘C’ prefix for a Welsh taxpayer as well as the prefix ‘S’ for a Scottish taxpayer.

From April 2020 the Earlier Year Update (EYU) will be replaced by the FPS to change any year to date figures. For the tax year 2018-19 either submission can be used and for prior years the EYU must be used.

There will also be, for the first time, a field for the PostGraduate Loan deductions included on the FPS.

Itemised payslips

From 6 April 2019 the payslips for workers whose pay varies by the number of hours worked must state the number of hours that the pay relates to. This could be shown as either a total figure or several figures by rate of pay or type of work. The thinking behind this is that hourly paid workers would be able to work out whether they have been paid the minimum wage or not. However, this may not be as easy as first assumed. Some hourly paid workers are paid monthly and their pay is worked out on an annual balance. In these circumstances it may be prudent to show the formula used to calculate their pay. This may reassure the worker and minimise any queries that would otherwise be raised.

Things to consider

In this the second of three articles it can be seen that the changes so far are either expected, in that they are annual increases, or that they are small adjustments to already existing processes or norms. These changes may not be big, but they are important, so take time to review and update all rates, process and documentation to ensure full compliance with payroll law and regulations.

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Julie Hodgskin is a fellow member of AAT, runs a licensed accounting practice and is a technical materials author for CIPP.