Outsourced Payroll Services and The Budget

HMRC introduce many changes that affect payroll during any given year. The biggest set of changes, of course, are proposed when the Chancellor stands up and presents the budget proposals. These are the key payroll proposals that Philip Hammond introduced on 22nd November.

Personal Allowance Changes

The UK’s standard personal allowance – the amount of tax-free income an employee with a salary up to £100,000 can earn – is to rise to £11,850, up from £11,500. Taxable income is the amount of an employee’s earnings that exceeds the employee’s personal allowance.

Tax Thresholds

The annual income threshold for the higher rate of personal income tax, when including taxable income and the standard personal allowance, is to increase from April 6 2018 to £46,350, up from the current threshold of £45,000,

The Chancellor stated that the Government is committed to further increasing the standard personal allowance to £12,500 and the higher rate threshold, when including the standard personal allowance, to £50,000 by 2020.

Minimum Wage Increases

From April 6, 2018, the mandatory minimum wage and non-mandatory National Living Wage for workers at least 25 years of age is to increase to £7.83 per hour, up from £7.50 per hour.

From April 6, 2018, the mandatory minimum wage rate for employees at least 21 years of age and up to 24 years of age also to increase to £7.38 per hour, up from the current rate of £7.05.

The mandatory minimum wage for employees at least 18 years of age and up to 20 years of age is to increase to £5.90 per hour and the mandatory minimum wage for employees at least 16 years of age but under age 18 is to increase to £4.20, up from the current rates of £5.60 and £4.05 respectively.

Also starting April 6, 2018, the minimum wage for apprentices under age 19 or apprentices of any age in their first year of apprenticeship is to be £3.70 per hour, up from £3.50 per hour.

Other Payroll Proposals

Electric Cars. From April 6, 2018, electricity that employers provide to charge employees’ electric vehicles is to no longer be subject to tax as a fringe benefit or benefit-in-kind.

National Insurance. Consideration of National Insurance Contribution (NIC) system changes, including the treatment of termination payments and the elimination of Class 2 NICs, is to be delayed until 2018 to provide the U.K. government with more time to set details of policy changes, the budget said. Employers are to remain primarily responsible for the deduction of NICs from salary or wages through the Pay As You Earn system and for the payment of these sums to Her Majesty’s Revenue & Customs.

Subsistence Costs for Travelling Overseas. April 6, 2019, employers who reimburse subsistence costs to employees travelling outside the U.K. by making payments in compliance with the benchmark scale rates set by Her Majesty’s Revenue and Customs will no longer be required to check receipts. Scale rates for employers reimbursing overseas subsistence or concessionary accommodations are to be placed on a statutory basis.

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