As always, the end of a tax year and the start of the new one has made the start of April a busy period for most of us, with filing deadlines to meet, new tax rules to adjust to, and records to update.
This year, things are far from business as usual, with the spread of COVID-19 putting many businesses into survival mode – but there are certain regular tasks that still need to be kept up, and one of those is payroll.
We’ve summed up the main payroll changes taking place in the 2020/21 tax year, and what you need to do as an employer.
National minimum wage changes
The main change to payroll this year was an increase to the national minimum wage rates. These are different depending on the age bracket an employee falls into, and whether or not they’re an apprentice.
As of 1 April 2020, you must pay staff the following minimum hourly rates:
- £8.72 for employees aged 25 and over
- £8.20 for those aged between 21 and 24
- £6.45 for those aged between 18 and 20
- £4.55 for under-18s
- £4.15 for apprentices who are under 19 or in the first year of their apprenticeship.
National insurance thresholds and statutory payments
As of 6 April 2020, the threshold for class 1 National Insurance contributions has been raised from £8,632 to £9,500 a year.
The standard rate of statutory sick pay has also increased from £94.25 to £95.85 a week, and statutory maternity, paternity and adoption pay has risen from £148.68 to £151.20.
Furloughing and the coronavirus job retention scheme
Aside from more routine payroll tasks, many employers will need to make adjustments as a result of the COVID-19 crisis.
The Government is offering a job retention scheme, which offers businesses a grant covering 80% of furloughed employees’ usual pay, up to £2,500 a month.
To use this scheme, you’ll need to decide which employees will be furloughed, agree that status with them and file a claim with HMRC. While furloughed, employees cannot carry out any work for you.
The scheme is available for employees who were on your payroll on or before 19 March 2020 and is open until 30 June 2020, although this can be extended.
Delay to IR35 in the private sector
A major change to the off-payroll working rules in the private sector was expected to come into effect from April 2020, but in light of current events, this has been postponed for 12 months.
If you’re a contractor working through a limited company or another intermediary, it’s nevertheless important to make sure you’re prepared for when the changes do come in on 6 April 2021.
Payroll deadlines for 2020/21
Here are the main deadlines for the new tax year:
- From 6 April onwards: Update your employee payroll records before their first payday in the new tax year. This includes preparing a payroll record, identifying the correct tax code, and entering that code into your payroll software. You should also update your payroll software, according to instructions from your software provider.
- By 31 May: Give a P60 to all employees on your payroll who were working for you on 5 April. This should summarise their total pay and deductions for the year.
- By 6 July: Report expenses and benefits you provided to employees in the 2019/20 tax year. You’ll then need to pay any class 1A National Insurance due by 22 July, or 19 July if you’re paying by post.