Employment Tax Changes 2019/20
With the 5 April rushing towards us and heralding the start of a new income tax year, some changes to bear in mind going forward.
PAYE and NICS
Announced in the November 2018 budget was an acceleration in the increase in the personal allowance to £12,500. Originally expected to rise to this level by 2020/21, this increase has been brought forward to April 2019. There have also been increases in the basic rate and National Insurance thresholds which are all set to benefit the taxpayer.
Income tax thresholds are determined by devolved parliaments and 2018/19 saw changes to the rates payable by Scottish taxpayers for the first time. These changes continue into the 2019/20 tax year with 5 different income tax rates in place for Scottish taxpayers. April 2019 also sees the introduction of Welsh tax codes. However, the tax rates for Welsh taxpayers in 2019/20 will mirror those in place for England and Northern Ireland so there will be no immediate financial impact. Tax rates are determined by where the tax payer resides, not where they work and are indicated on tax codes by a prefix of “S” for Scottish taxpayers and “C” for Welsh taxpayers. HMRC will notify employers of any amendments via P6 or P9 notices.
There are increases to the thresholds for both Plan 1 and Plan 2 Student Loan deductions. April 2019 will also see the first Post Graduate Loan (PGL) deductions. Employers will continue to apply student loan deductions based on the information contained within the P45, Starter Checklist or SL1 notice from HMRC. Instructions to operate a PGL will come from HMRC in the form of PGL1 notification.
National Minimum Wage and Statutory Payments
Increases to the National Minimum Wage across all age groups take place from 1 April 2019. The new rates are as follows:
Aged 25 and above £8.21
Aged 21-24 £7.70
Ages 18-20 £6.15
Aged under 18 £4.35
(but above compulsory school leaving age)
Apprentices aged under 19 £3.90
Apprentices aged 19 and over £3.90
(but in the first year of their apprenticeship)
Increases for statutory payments such as Statutory Maternity, Paternity, Adoption and Shared Parental Pay and Statutory Sick Pay take place from 6 April 2019.
April 2019 sees the final increase in the Automatic Enrolment minimum pension contributions rate. From April, the minimum contribution rate increases to 8% of which a minimum of 3% must be an employer contribution.
From April 2019, the statutory right to receive an itemised payslip will be extended to all workers, not just employees. For those whose pay varies depending on the number of hours worked, their payslip must show the amount of time they are being paid for. Employees are defined under the Employment Rights Act 1996.
Increases of 3% on the calculation percentages used on all CO2 emission rates and an increase in the fuel benefit charge will see company car drivers pay more for their benefit. The diesel surcharge increased from 3% to 4% from April 2018. However, new diesels that comply with the Euro 6d emissions standard (also referred to as RDE2) do not attract this surcharge. With Euro 6d testing not being mandatory on new cars until January 2021, it is unlikely that diesel company car drivers will benefit from this just yet.
For 2019/20, the 3% increase applies to all cars including electric and Ultra Low Emissions Vehicles (ULEV’s). ULEVs are cars with CO2 emissions below 75g/km. However, from 2020/21 all electric cars attract a benefit in kind percentage of just 2% – a reduction from 16% in 2019/20! The calculation percentage of hybrid cars will be assessed by the number of miles they can be driven in all-electric mode ranging from 2% for electric range of over 130 miles to 14% for less than 30 miles. These represent significant savings for the tax payer and worth considering if you’re looking to change company car soon.
Other expenses and benefits.
Employers who reimburse subsistence costs at HMRC benchmark rates will no longer have to check receipts from April 2019. However, they will still need to keep records demonstrating the expense was incurred for qualifying business purpose.
Currently where employers pay contributions to a life assurance policy or a qualifying recognised overseas pension scheme (QROPS) and the beneficiary is the employee (or certain members of the employee’s family), no benefit in kind exists. From April 2019 this exemption is extended such that the provision of death or retirement benefits will not be subject to tax when the beneficiary is any individual or a registered charity.
Following the Independent Taylor Review of Modern Working Practices and the subsequent release of the Good Work Plan, the gig economy and employment status continues to receive attention. There have been promises of clearer guidance from HMRC along with developments to its Employment Status Indicator tool but with many cases still being decided by the courts, uncertainty looks likely to continue into 2019/20 and beyond.
The Good Work Plan also outlined changes to the holiday pay reference period for the calculation of holiday from 12 weeks to 52, a ban on employers making deductions from tips and gratuities and a right to a written statement outlining contract and rights from day one for all workers, not just employees.
Whilst there remains much uncertainty ahead, there are some changes already announced for April 2020. These include:
- extension to the off-payroll working legislation to those engaged through personal service companies to most of the private sector
- Secondary Class 1 NICS (employers) payable on termination and redundancy payments above £30,000
- Executive Pay Ratio reporting
We will be covering all of these aspects in our P11D workshop which are to take place in the spring. Details of the events will be posted on our website. In the meantime if you would like help or guidance with any employment tax issues, please get in touch with our Tax Team.