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The UK's Payroll changes continue to pile-on

The UK's Payroll changes continue to pile-on

April 2018 saw significant changes as a result of the first point of grandfathering ending the first year of Optional Remuneration Arrangement (OpRA) transition, the first rise in Auto Enrolment minimum contributions and the phased changes being applied to termination payments. Voluntary payrolling requirements also brought in significant reporting changes for company cars, it’s nothing like the old P46(Car) submission.

Northern Ireland fines and penalty enforcement AEO June 2018

On the 23rd April 2018, the The Justice (2016 Act) (Commencement No.2) Order (Northern Ireland) 2018 initiated a new type of Attachment of Earnings Order for Northern Ireland which is applicable from 1st June 2018. Fortunately, they very much align with weekly and monthly Direct Earning Attachment (DEA) used by the DWP and local authorities for recovery of housing benefit etc. That was an unexpected change for payroll managers and payroll software solutions. Fortunately, pre-existing DEA capability may cover the requirements.

Brexit, March 2019

HM Revenue and Customs continue to move forward with their digital strategies, although as a result of Brexit, the pace of change is indicated as being slowed down.

RTI & Dynamic Tax Codes - imminent

Continued issues are experienced by employers in the operation of Real Time Information (RTI), when it works well, it’s good, but when it goes wrong, it is spectacularly problematical. HM Revenue and Customs are readying for the introduction of dynamic tax codes. Part of the process is to ensure that the tax code expected by HMRC to be operated, is operated, or else the employer will be issued with a repeating tax code change instruction via P6.

Welsh Taxation 2019

The continued devolution of tax continues in the UK. April 2018 sees the shrinking of the ‘rest of the United Kingdom’ taxation to be reduced to England and Northern Ireland.

For a number of years, the Scottish Parliament (whether they used it or not) could vary the amount of income tax. 2017 saw the first year of Scottish Tax breaking away from the rest of the UK and 2018 the first year of significant change in bands and additional taxation rates.

April 2019 see similar powers being given to the Welsh Assembly. For the first time, the assembly will have to set Welsh tax rates to obtain their share on top of the general United Kingdom tax slice. The result is that UK employers may have a need to operate three different taxation regimes covering: rest of the UK (England and Northern Ireland), Scotland and Wales.

Let’s just hope that Basic Rate remains common across all three taxations, else Pensions will become complex for Relief At Source schemes.

The RTI FPS field ‘Tax Regime’ will, in addition to ‘S’ for SRIT/Scotland, will additional have an allowed value of ‘C’ for Wales/Cymru.

Postgraduate Loans (PGL) 2019

Since academic year 2016, graduate have been able to borrow funding for postgraduate studies such as Masters and PhD. As a consequence, April 2019 sees the first postgraduate loan deductions being required to be recovered via payroll on earnings over £21,000 at a rate of 6%. HMRC are preparing changes to the: New Starter Checklist, and new postgraduate loan deduction start (PGL1) and stop (PGL2), the notifications are being introduced independent of the pre-existing Student Loan SL1 and SL2 notices.

Pension AE increase 2019

Following on from this year’s 100% employer increase in minimum pension AE contributions, and 200% increase for employees, April 2019 see a further rise in minimums by another 50% increase for employers to 3% and 2/3rd increase for employee to 5%. And then there are the potential DWP proposed changes to AE on the basis of contributions and who to enrol etc. Employers may find that the complexities increase with contributions starting to bite into take home pay and business profitability.

Hours on Pay Statements

April 2019 also see the introduction of legal requirements to pay statements or payslips, employers with a new legal obligation to show the hours being paid this time. One of the many measure that is coming into play along with proposal from the Taylor review to ensure that low paid workers are not being exploited. Further proposal are being considered in relation to employment rights, the policing of National Minimum Wage and Holiday payments – powers may be handed over to HMRC.

Termination Payments and Class 1A on amount over £30,000

And the delayed changes in relation to Class 1A on termination payments over £30,000 are to be progressed, how, we don’t really know, but a delayed element from a proposal originally set for April 2018. So, for Employee who receive Tax and NI free termination payments on the first £30,000, the employer will now experience a 13.8% NI tax on amounts that exceed.

The United Kingdom payroll space is far from steady yet, there is continue change and modernisation taking place. The payroll software industry and UK payroll professionals need to keep on their toes.

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About the author

Simon Parsons
Director of Payments, Benefits & Compliance Strategies

Simon has been a major contributor to SD Worx’s payroll expertise since 1984. Besides being influential in the development of SD Worx’s payroll services, he is a major presence on a number of HMRC consultative groups and committees.

A fellow of the Chartered Institute of Payroll Professionals and one of the original Masters of Science in Payroll Management, Simon is a regular author and speaker on payroll matters. He is also Chair of IReeN, the electronic exchange with government user network, and the Honorary Chair of the British Computer Society (BCS) Payroll Group (The Chartered Institute for IT). 

Simon has won a number of awards in the past including the Strathearn Award for Lifetime Achievement at the 2012 Pay & Benefits Awards, the Payroll Alliance Award for Advancing the Payroll Profession in 2010 and IPP Person of the Year in 2006.

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