No, I am not running a couple of months late, I am actually a little early. I am talking about the most important ‘new year’ in my calendar, the New Tax Year! 6th April is the big date in all payrollers calendars and impacts every employer. It is the date that can not be selected by the employer, as a financial year can, and all employers and employees have to report income subject to PAYE in line with this date.
So what changes do we have to look out for?
• Personal allowance increasing by £350 from 1150L to 1185L
• 20% tax banding increasing by £1,000
• Minimum Auto Enrolment Pension contributions increasing to 2% for the employer and 3% for the employee
• Living Wage increases to £7.83ph for those 25yrs and over
• All other minimum wage rates also increase £7.38ph 21-24yrs, £5.90ph 18-20yrs, £4.20ph 16-17yrs
So what impact are the changes going to have on the average employee? The average salary in the UK is £28,758, if their salary remains unchanged then they will take home £261.10 less over the course of the year and will cost their employer £189.86 more.
A living wage employee on 40 hours a week contract will be paid £686.40 more gross per year, receiving an extra £399.74 in their pocket, the cost for the employer will increase by £854.07 for the year.
Both examples are calculated on an annualised basis using with a relief at source pension scheme with contributions based on qualifying earnings. Under a relief at source pension scheme the HMRC puts 20 pence into the pension for every 80 pence the employee pays in.
As a reminder don’t forget to send your employees their P60’s for 2017-18 by 31st May and P11D’s by 6th July.
If you have any questions on payroll or pension changes for the new tax year, please give us a call on 01933 409488 for a no obligation conversation.
Andi Herrington is the Director of Payroll Services at Wallis Payroll based in Wellingborough
Originally published in the February edition of All Things Business