Payroll Changes Summary
1st APRIL 2016 – Introduction of the living wage
On 1st April 2016 The Living Wage is being introduced for all employees aged 25 and over, the rate will be £7.20 per hour and must be paid to all employees from their 25th birthday. This rate is likely to increase annually. The current minimum wage rates still apply for employees up to their 25th birthday.
In summary these are the rates that apply from 1st April 2016:
- Age 25 and over – £7.20 per hour – change 1st April 2017
- Age 21 to 24 – £6.70 per hour – change 1st October 2016
- Age 18 to 20 – £5.30 per hour – change 1st October 2016
- Under 18 – £3.87 per hour – change 1st October 2016
- Apprentice Rate aged 16 to 18 and 19 or over in their 1st year of apprenticeship – £3.30 – change 1st October 2016
Removal of the temporary RTI relaxation
From 6th April 2016 the temporary RTI relaxation rules that allowed employers with 9 or fewer employees to make a single monthly RTI submission are being removed.
Small employers will therefore need to comply will full RTI obligations from 6th April, this includes submission on or before every pay date.
New NI category apprentices under 25
From 6th April 2016, if you employ an apprentice you may not need to pay employer Class 1 National Insurance contributions (NICs) on their earnings below £827 a week (£43,000 a year).
They must be under 25 years old and following an approved UK government statutory apprenticeship framework (frameworks can differ depending on the UK country).
You can check that your apprentice is in a qualifying statutory apprenticeship here.
If your apprentice meets the conditions above, you will need to have evidence to be able to apply the relief. The link above will give guidance on what evidence is required.
NICs category letters to use if the above requirements are met.
|Category letter||Apprentice conditions|
|H||Apprentice standard rate contributions – if your apprentice is under 25 and in an approved apprenticeship framework|
|G||If your apprentice is a foreign-going mariner and is under 25|
Informal apprentice schemes do not qualify for the relief.
Increase to NIC employment allowance
From 6th April 2016 the employment allowance will be increased to £3,000 per annum for those employers that qualify.
Removal of NIC employment allowance
From 6th April 2016 the employer allowance is being removed for 1 director companies where the sole director is the only employee. We anticipate anti-avoidance rules to remove the allowance for companies that only employ members of the director’s household.
New student loan deduction
From 6th April 2016 there will be 2 different student loan deductions and the declaration given by the employee when starting will determine the one to be used by the employer.
Plan 1 is for:
- English and Welsh students who started before 1st September 2012
- All Scottish and Northern Irish students
- Loan repayments start when the employee earns over £17,495 for the 2016/17 tax year.
Plan 2 is for:
- English and Welsh students who started on or after 1st September 2012.
- Loan repayments start when the employee earns over £21,000.
- There will be an additional question on the HM Revenue and Customs Starter Checklist (replaced P46) as to which plan student loan deductions should be made.
- The employer should apply Plan 1 if unsure. HM Revenue and Customs will issue a notice if this needs to be changed.
Removal of Contracted out NI Contributions
On 6th April 2016 these rules will change so that all employees who are currently subject to contracted out NI contributions will no longer be contracted out with standard rate NI contributions applying.
Employers will need to ensure that from 6th April 2016 all employees who were contracted out are put onto the correct NI table letter.