April marks the start of a new tax year, which is often accompanied by a list of rules and regulations to get your head around. Phase 3’s Head of Payroll Services Adam Ford shares his top five things every HR & Payroll professional should know in the upcoming year.
1. IR35 and off-payroll working
Before the 6th April 2021, if your worker provides services to a client through you in the public sector, the client must decide your employment status. However, if they are operating in the private sector, you as the employer must decide your worker’s status.
From the 6th April 2021, all public sector clients and medium or large-sized private sector clients will be responsible for deciding your worker’s employment status. This includes some charities and third sector organisations.
If the off-payroll working rules apply, your worker’s fees will be subject to Income Tax and National Insurance contributions.
What the changes mean
If your worker provides services to a public sector client, or a medium or large-sized private sector client, they:
- should get an employment status determination from the client, as well as the reasons behind that determination
- will be able to dispute the determination given to them if they disagree with it
Different rules apply if your worker:
- does not get an employment status determination from the client
- provides services to small clients in the private sector
Income Tax and National Insurance
If your worker provides services to a small private or voluntary sector organisation and the off-payroll working rules apply, you (the worker’s intermediary) will be responsible for deducting Income Tax and National Insurance contributions from your worker’s fees and paying them to HMRC.
The deemed employer will become responsible for deducting Income Tax and employee National Insurance contributions and paying them to HMRC, as well as paying employer National Insurance contributions and Apprenticeship Levy, if applicable, if both:
- a public authority, medium-sized or large-sized client makes the status determination
- the off-payroll working rules apply
2. National Living Wage increase
The National Living wage has increased (for those over 23 years of age) to £8.91 per hour. In many systems this change does not happen automatically and this can have an impact on:
- National Living Wage checking reports
- Pension scheme assessments of earnings to determine if the employee can have salary sacrifice pensions
- Earnings assessments for other benefits
Download our Tax Fact Card for more useful rates and threshold’s for payroll.
3. Don’t forget alabaster
Any employee who is awarded a pay rise from the start of the qualifying period for calculation until the end of the period of maternity leave will need to have their maternity pay recalculated to take the pay rise into account.
For those employees who are currently on maternity leave and have received a pay rise due to the National Minimum wage and National Living wage increases, their maternity pay will need to be recalculated to reflect this.
4. Changes to the statutory redundancy pay calculations
New limits on employment statutory redundancy pay come into force on 6 April 2021.
Employers that dismiss employees for redundancy must pay those with two years’ service an amount based on the employee’s weekly pay, length of service and age. The weekly pay is subject to a maximum amount. This amount is £544 from the 6th April 2021.
5. Report your gender pay gap
Employers with 250 or more employees are usually required to publish the gender pay gap report by April. The deadline for private-sector and voluntary-sector employers is normally 4th April, while for public-sector employers it is 30th March.
However, the Equality and Human Rights Commission (EHRC) has stated that, due to the coronavirus pandemic, enforcement of the gender pay gap reporting duty for the 2020/2021 reporting year is delayed for six months, and does not begin until the 5th October 2021.
Employers are still required to report their figures, but have an extra six months in which to do so before enforcement action begins. The EHRC still encourages employers to report their data before October 2021, where possible.
New tax year considerations
- IR35 and off-payroll working
- Increase to National Living Wage
- New maternity leave calculations
- Take note of changes to statutory redundancy pay
- Report your gender pay gap
This blog has been written by Adam Ford, Head of Payroll Services at Phase 3.