Earlier this month, Rishi Sunak delivered the Spring 2021 Budget. As payroll and HR technology consultants we are well aware of the impact that the yearly budget delivered by the chancellor can have on HR and payroll, so we wanted to dive into the announcements to see what it all means. Here are our thoughts on the five key takeaways from the Budget 2021 for HR & Payroll.
Off-payroll working plans to go ahead
The new Off-Payroll Working Rules (for contractors) had been due to take effect in April 2020 but were delayed for a year in light of the Covid-19 pandemic. As part of the budget the Chancellor confirmed that the new rules will definitely apply from 6 April 2021. Any business engaging workers through intermediaries (such as personal service companies) must ensure that they are fully prepared for the changes. HMRC have stated that they are keen to support businesses and have confirmed their pledge not to impose penalties in the 2021-22 tax year unless there is evidence of deliberate non-compliance. HMRC have also said that (unless they have reason to suspect fraud or criminal conduct) they will not use information acquired as a result of the rules to open a new compliance enquiry into the returns for earlier tax years.
Furlough extended to the end of September 2021
The furlough scheme (also known as the Coronavirus Job Retention Scheme) was extended to the end of September 2021. The Chancellor confirmed that as businesses start to reopen there will be an expectation that employers will start to contribute to the cost of the furlough scheme. The scheme currently allows employers to claim 80% of employees wages up to a maximum of £2500. The scheme will continue as per the current rules from March to June, with employers expected to contribute 10% of the employee wages in July and 20% in August and September to ensure the employee still receives the minimum of 80% whilst furloughed.
Visit our Covid19 hub for more CJRS resources.
National Living Wage increases
The Chancellor also announced an increase to the National Minimum Wage and changes to the age threshold for entitlement to the National Living Wage. As of the 1st April 2021, the National Living Wage will rise to £8.91 per hour and the age threshold will be lowered from 25 to 23.
At the time of writing, the National Living Wage is £8.72 per hour and all workers over the age of 25 are entitled to this rate of pay. Those aged below 25 receive varying rates of minimum hourly pay depending on their age and if they are employed in an apprenticeship scheme.
Personal tax thresholds
As announced at Spending Review 2020, the government will increase the Personal Allowance and the basic rate limit in line with the September CPI figure for 2021 to 2022. The Personal Allowance will therefore increase to £12,570 and the basic rate limit to £37,700 for 2021 to 2022. The higher rate threshold (the Personal Allowance added to the basic rate limit) will increase to £50,270 for 2021 to 2022.
As announced in the Budget 2021, the government will legislate in Finance Bill 2021 to set the Personal Allowance at £12,570 and basic rate limit at £37,700 for 2022 to 2023, 2023 to 2024, 2024 to 2025 and 2025 to 2026. The higher rate threshold will therefore be £50,270 for these years.
The National Insurance contributions Upper Earnings Limit and Upper Profits Limit will remain aligned to the higher rate threshold at £50,270 for these years. The National Insurance contributions Upper Earnings Limit and Upper Profits Limit will be legislated for in the annual setting of National Insurance contributions limits and thresholds as standard.
Download our Tax Fact Card for more useful rates and threshold’s for payroll.
Coronavirus SSP rebates to continue
The Chancellor has also confirmed that the SSP rebate scheme for small and medium-sized enterprises (SMEs) will remain in place.
The scheme, which was announced at last year’s March Budget, allows SME employers to claim a refund for SSP in relation to Covid-19 (Coronavirus) of up to two weeks of eligible SSP costs per employee.
The scheme was put in place as a temporary measure to support employers in response to the pandemic and high levels of sickness absence associated with those who are absent from work with symptoms.
Takeaways from the Budget 2021 for HR and payroll
- Off-payroll working plans to go ahead
- Furlough extended to the end of September 2021
- National Living Wage increases
- Personal Tax Thresholds increase
- Coronavirus SSP rebates to continue
If you are interested in how Phase 3 can take your payroll and HR technology investments to the next level, please get in touch and learn about our payroll consultant services.
This blog has been written by James Proctor, Director of Consulting & Services at Phase 3.