Tax fact guide Making payroll and HR easy
TFG01 04/2019
fpb.org
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Tax Fact Card : Making Payroll and HR Easy National insurance 2019/2020 You can only make National Insurance deductions on earnings above the Lower Earnings Limit (LEL National insurance thresholds Pay Frequency
Lower Earnings Limit (LEL)
Primary Earnings Threshold (PT)
Secondary Earnings Limit (SL)
Upper Earnings Limit (UEL)
Weekly
£118.00
£166.00
£166.00
£962.00
Monthly
£512
£719
£719
£4167.00
Annual
£6136
£8632
£8632
£50000
Class 1 National Insurance contributions Employee National Insurance (primary deductions) is deducted from their pay through PAYE. Employer national insurance (secondary deductions) is sent to HMRC as part of your PAYE bill. Primary Deductions National Insurance
Secondary Deductions
Employee Earnings
Employee Earnings
Employer Earnings
Employer Earnings
Above PT and including
above UEL
above ST and including UEL
above UEL
category letter
UEL
A Standard Rate
12%
2%
13.80%
13.80%
B Reduced Rate
5.85%
2%
13.80%
13.80%
C Above SPA
0%
0%
13.80%
13.80%
H (apprentice <25)
12%
2%
0%
13.80%
J (deferment)
2%
2%
13.80%
13.80%
M (under 21)
12%
2%
0%
13.80%
Z (deferment <21)
2%
2%
0%
13.80%
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Class 1A National Insurance Class 1A is paid by the employer for benefits provided to employees, such as company cars and health insurance. In 2019/2020 at a rate of 13.8% on most taxable benefits. Contributions must be paid by the 19th July if posted or the 22nd July if electronic payment method is used. This will also apply even where benefits have been pay rolled in the 2018/2019 tax year.
Class 1B National Insurance Class 1B is paid by the employer for PAYE Settlement Agreements (PSA) in 2019/2020 at a rate of 13.8% on most taxable benefits. A PSA allows you to make one annual income payments to cover minor, irregular or impractical expenses or benefits for your employees. Contributions must be paid by the 19th October if posted or the 22nd October if electronic payment method is used.
Class 2 National Insurance There are two types of national Insurance if you’re self employed. Class Class 2 - if your profits are above £6,363 Class 4 - if your profits are above £8.632
You pay £3.00 per week 9% of profits £8,632-£50.00 2% of profits above £50.000
Statutory Maternity, Paternity, Adoption and Shared Parental Pay The rates below will apply from April 2019 Type of payment Statutory Maternity Pay - weekly rate for the first 6 weeks
Statutory Maternity Pay - Remaining 33 weeks
Statutory Paternity Pay
Statutory Adoption Pay - weekly rate for the first 6 weeks
Statutory Adoption Pay - remaining 33 weeks
Statutory Shared Parental Pay
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2019-2020 rate 90% of average weekly earnings £148.68 per week or 90% of average weekly earnings (whichever is lower) £148.68 per week or 90% of average weekly earnings (whichever is lower) 90% of average weekly earnings £148.68 per week or 90% of average weekly earnings (whichever is lower) £148.68 per week or 90% of average weekly earnings (whichever is lower)
As an employer you can recover your payments from HMRC. You can claim 92% if your total Class 1 National Insurance (employer and employee contributions) is above £45,000 for the previous tax year. You can claim 103% if your total Class 1 national Insurance for the previous year is £45,000 or lower.
Statutory Sick Pay (SSP) To be eligible for SSP, an employee must have been ill for at least 4 consecutive days and earn at least £116 per week. SSP can be paid for a maximum of 28 weeks. Statutory Sick pay cannot be reclaimed. 2019-2020 rate Standard rate
£94.25 per week
National Minimum Wage & National Living Wage Rate
April 2017
April 2018
April 2019
Adult Rate 21-24 inclusive
£7.05
£7.38
£7.70
Adult Rate 25 and over (National Living wage)
£7.50
£7.83
£8.21
Development Rate (inc 18-20 year olds)
£5.60
£5.90
£6.15
Under 18 but over compulsory school age
£4.05
£4.20
£4.35
Apprentices under 19 or in first year
£3.50
£3.70
£3.90
Income Tax rates 2019/20 England and Northern Ireland
Tax rate %
Taxable Income
Personal allowance
0%
up to £12,500
Basic rate
20%
£12,501 to £37,500
Higher rater
40%
£37,501 to £150,000
Additional rate
45%
over £150,000
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Scotland
Tax rate %
Taxable Income
Personal allowance
0%
£12,500
Starter rate
19%
Basic rate
20%
£2,050 to £12,444
Intermediate rate
21%
£12,445 to £30,930
Higher rate
41%
£30,931 to £150,000
Top rate
46%
£150,000
Annual earnings above the PAYE tax threshold and up to £2,049
Scottish Rate Tax Payers Codes will be determined and prefixed with an ‘S’. The ‘S’ prefix can only be issued by HMRC or as shown on an employees P45. More information about Tax Codes can be found at www.gov.uk/tax-codes.
Personal Income Tax Allowances 2019-2020 This allowance is given in addition to the standard personal allowance of £12,500. HMRC will provide each of your employees with a tax code and your payroll system will calculate the National Insurance to deduct. Income Limit for Personal Allowance
£100,000
Married Couples/Civil Partnership Allowance: born before 6th April 1935 - Maximum amount of Married Couples Allowance
£8,915
- Minimum amount of Married Couples Allowance
£3,450
Income Limit for Married Couples/Civil Partnership Allowance
£29,600
Married Allowance (Transferable Tax Allowance)*
£1,250
Blind Persons Allowance
£2,450
Dividends Allowance
£2,000
Personal Savings Allowance for Basic Rate Tax Payers
£1,000
Personal Savings Allowance for Higher rate Tax Payers
£500
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*Transferable tax allowance: This allowance is for the transfer of an unused portion of a PAYE tax payers tax free allowance to their spouse, up to the value of £1,185 (10% of the personal allowance) for 2018/2019. Applies to basic tax payers only
Child Care Vouchers The Government closed the Childcare Vouchers scheme to new entrants on 4th October 2018. This means that if you are a parent looking to join Childcare Vouchers for the first time, or an employer looking to start a scheme in your business for the first time, that option is no longer available to you. Those parents already on the scheme can continue to benefit from the savings as long as their wages are adjusted on or before 4 October 2018. To continue the vouchers: •
the employee needs to stay with the same employer and the employer continues to run the voucher scheme
•
the employee does not take an unpaid career break of longer than a year
The employee can take up to £55 a week of their wages, which is not applicable for tax or National Insurance.
Auto Enrolment Pension Scheme Increase The minimum contributions staff pay into your automatic enrolment workplace pension scheme will increase from 6 April 2019. This is also sometimes known as phasing. It is an employer’s responsibility to make sure these increases are implemented. Rate
New Rate 6th April 2019
Employer Minimum Contribution
Staff Contribution
Total Contribution
3%
3%
8%
By law a total minimum amount of contributions must be paid into the scheme. You, the employer, must make at least the minimum employer contribution towards this amount and your staff member must make up the difference. If you decide to cover the total minimum contribution required, your staff won’t need to pay anything. The amount you and your staff pay into your pension scheme will vary depending on the type of scheme you have chosen and the rules of that scheme. Your staff contribution may also vary depending on the type of tax relief applied by your scheme. You can find this information in the scheme documents sent to you when you set up the pension scheme or you can speak to your pension provider.
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Most employers use pension schemes that from April 2019 will require a total minimum of 8% contribution to be paid. The calculation for this type of scheme is based on a specific range of earnings. For the 2018/19 tax year this range is between £6,032 and £46,350 a year (£503 and £3,863 a month, or £116 and £892 a week). These figures are reviewed each year by the government. Under the Pensions Act 2008, you must make sure the right minimum contributions are being paid for your staff.
Pension Scheme Allowance A UK resident taxpayer under the age of 75, you can contribute up to the annual allowance of £40,000 into your pensions, while still receiving tax relief. The annual allowance applies across all of the schemes you belong to, it’s not a ‘per scheme’ limit and includes all of the contributions that you or your employer pay or anyone else who pays on your behalf
The Tapered Annual Allowance The tapered annual allowance came into force as of 6 April 2016 for high earners. For every £2 of income above £150,000 per annum, £1 of annual allowance will be lost. The maximum reduction will be £30,000 meaning that anyone earning over £210,000 will have their annual allowance capped at £10,000. An income floor will mean the taper will not apply unless the individual’s income excluding pension contributions exceeds £110,000 (referred to as their “threshold income”).
Employment Allowance The Employment Allowance scheme enable eligible business to receive a reduction of up to £3,000 each year on their employers Class 1 National Insurance Contributions. You can claim through your payroll system by putting a ‘yes’ in the ‘Employment Allowance’ indicator field next time you send an employment payment summary.
Company Cars For employees HMRC considers a company care as a benefit in kind know as BiK for short. This is therefore a valuable perk over and above the employee’s salary. The employer will deduct any company tax due to HMRC at the source. Vehicles are taxed a different rates depending upon •
Taxable value of the vehicle/P11D value
•
How much Carbon Dioxide the car emits (calculation is value of the care plus VAT, delivery less the cost of the 1st registration and rad tax) use GOV.uk company car and car fuel benefit calculator www.gov.uk/update-company-car-details
•
Fuel type of the car (petrol, diesel, hybrid or electric
•
Income tax bracket (basic higher or additional rate bands)
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Benefit in Kind (BiK) % rates for company cars 2019-20 (Petrol & Diesel) CO2 Band
%Petrol
%Diesel
CO2 Band
%Petrol
%Diesel
0-50
16
20
135-139
31
35
1-75
19
23
140-144
32
36
76-94
22
26
145-149
33
37
95-99
23
27
150-154
34
38
100-104
24
28
155-159
35
39
105-109
25
29
160-164
36
40
110-114
26
30
165-169
37
41
115-119
27
31
170-174
37
41
120-124
28
32
175-179
37
41
125-129
29
33
180+
37
41
130-134
30
34
Diesel supplement has now increased to 4% from 2018/2019. The supplement applies if: • The car is diesel only and not a hybrid • It was registered between 1st January 1998 and 31st August 2017 • It was registered on 1st September 2017 or after, but it isn’t RDE2-certified. RDE2 stands for Real Driving Emissions 2. This emissions test finds out how much nitrogen oxide (NOx) the car emits under real driving conditions. The RDE2 standard is 0.080 grams of nitrogen oxide per kilometre • The diesel supplement does not have to be paid if proof is available that the vehicle emits less than 0.080 grams of nitrogen oxide per kilometre. Benefit in Kind rates for electric vehicle and hybrids are calculated according to how many miles they can drive without producing any CO2 emissions known as zero emission mileage. Electric cars do not produce emissions so are taxed at the lowest rate.
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Benefit in Kind (BiK) % rates for company cars 2019-20 (Electric) CO2 Emissions
Zero Emission Mileage
2018/2019
2019/2020
2020/2021
13%
16%
2%
0 1-50
>130
13%
16%
2%
1-50
70-29
13%
16%
5%
1-50
40-69
13%
16%
8%
1-50
30-39
13%
16%
12%
1-50
<30
13%
16%
14%
51-54
16%
19%
15%
55-59
16%
19%
16%
60-64
16%
19%
17%
65-69
16%
19%
18%
70-74
16%
19%
19%
75+
16%
19%
20%
Car Fuel Benefit charges When a company car or fuel is used for personal use by an employee, this is deemed to be a benefit in kind, and therefore the employee must pay tax on that benefit. The charge for tax for fuel provided for private use in a company car is based on the same percentage in the previous tables for petrol and diesel rates. Multiplied by a fixed value of £24,100 for 2019/2020.
Van and Van Fuel Benefit charges If a company van is available for an employees personal use, then Van Benefit is chargeable and tax is to be paid on this. From 6th April 2019/2020 van benefit charge has increased to £3,430 per year If the company pay for private use of fuel, the fuel benefit tax will also apply which for 2019/20 is £655 per year. Employees must pay tax on these benefits at their usual tax rate.
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Advisory Fuel Rates for Company Cars Engine Size
Petrol
LPG
Engine Size
Diesel
1400cc or less
11p
7p
1600cc or less
10p
1401cc 2000cc
14p
8p
1601cc 2000cc
11p
Over 2000cc
21p
13p
over 2000cc
13p
Figures issued 1st March 2019 with HMRC reviewing on a quarterly basis in June, September and December. For the most up to date figure refer to www.gov.uk/government/publications/ advisory-fuel-rates Hybrid cars are treated as either petrol or diesel cars for this purpose.
Advisory Electricity Rate Electricity is not a fuel for car fuel benefit purpose and the rate for a fully electric car is 4p per mile.
Private Vehicle Authorised Rates Vehicle Cars
per mile
Notes
45p
up to 10,000 miles in the tax year
25p
additional miles
5p
each qualifying passenger if paid by employer
Motor cycles
24p
Pedal cycles
20p
Passenger Payments
5p
only if paid by the employer
Note: Refer to HMRC website for passenger rate payment rules.
Student Loan Deductions From 6th April 2019 Plan Type 1, this is for a student that started their studies before 1st September 2012 repayments will commence when their income is £18,935. For Plan Type 2 student that started their studies after 1st September 2012 repayments will commence when their income is over £25,725 Deductions are 9% over the threshold.
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Trivial Benefits No tax is paid on a benefit for an employee if all the following apply •
It cost the employer £50 or less to provide
•
It is not cash or cash voucher
•
It is not a reward for the work or performance
•
It is not in the terms of the contract of employment
This is known as a trivial benefit – there is no tax or national insurance applicable and you HMRC do not need to be made aware. Tax will be applicable it is above the above.
Dispensations Exemptions have replaced dispensations. You can’t apply for a dispensation any more. Dispensation ceased 5th April 2016, but the expenses covered by it will be covered by the exemption. If you agreed bespoke rates with HMRC between 6 April 2011 and 5 April 2016 as part of your dispensation, you can apply to carry on using them. Bespoke rates can be used for up to 5 years from the date they were agreed. Employers need now to decide what is applicable to the P11D as a business expense and ensure they have a expense policy.
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TFG01 04/2019