We have highlighted some key points that relate to payroll from Philip Hammond’s announcements in the Budget.
The Chancellor Philip Hammond presented his second Autumn Budget on Monday 29 October 2018. This summary focuses on payroll related points. If you have any questions, please get in touch.
First of all, the Chancellor announced that he will roll out the IR35 off-payroll working rules to the private sector from 6 April 2020. Importantly, responsibility for operating off-payroll rules is transferred from the individual to the employer, but only medium and large organisations will be affected by this change.
For the moment there are no plans to force these rules on small companies. What this means in practice is that it will become the employer’s responsibility to ensure that any contractors shouldn’t be taxed as real employees. Before now this responsibility has fallen on contractors directly.
It is also worth noting that the rules will apply to any contracting arrangements already in place at 6 April 2020. So bear this in mind for new contracts beginning after 6 April 2019.
Increased personal tax allowances
The personal allowance is currently £11,850 and will increase to £12.500 from April 2019. The marriage allowance will increase to £1,250.
Increased personal NIC allowance
The earnings limit for paying National Insurance will rise slightly from £8,424 to £8,632.
Minimum wage increases
Following recommendations of the independent Low Pay Commission (LPC) the National Living Wage (NLW) will increase by 4.9% from April 2019. The government will also accept LPC’s recommendations for the National Minimum Wage (NMW).
The £3,000 Employment Allowance will also face new restrictions from April 2020. Only businesses with a National Insurance bill under £100,000 will be able to claim; therefore removing this popular benefit for many small businesses.
Including Hours Worked on Payslips
The Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) Order 2018 was passed and comes into force from 6 April 2019.
There is a change to how wages or salary payments – which vary by reference to time worked – are to be shown on employees’ payslips.
As the employer, you will be required to provide your employees who are paid according to ‘time worked’ with a detailed payslip showing the unit description “hours” and total hours worked separately for each type of work.
As a result, this will ensure you meet the minimum pay obligations (National Minimum Wage and National Living Wage). It also allows your employee to identify what they are being paid and equate that with worked time.