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Accountants in Practice

 Payroll Changes 2016/17

By Simon Palmer


2016/2017 brings a mass of changes to Payroll, from the introduction of Scottish Tax to the easement of Micro employers allowance. Its a year of change so here is a brief summary of some of what this year brings.

  • The suffixes of P and Y will be removed from tax codes HMRC should issue a P9 for any employees who are using these tax codes. If your with us this change will be handled by QTAC as you migrate your data across to the new year.
  • The Scottish Rate of Income Tax will be in effect from December 2015. On 6th April 2016 a new rate of tax will come into affect for people who have their main address (for 183 days or more of the tax year) in Scotland. The Scottish Government has proposed that the Scottish rate will be 10% for the tax year 2016 to 2017. For more information click here 
  • Employment Allowance: As a company you can claim employment allowance if you are paying class 1 national insurance. This allows you £3,000.00 of employers NI contributions that do not have to be paid. There are some circumstances where you may not be eligible but these are rare, the revenues site has guidance and a calculator to check whether you are eligible. Please note a new rule has been introduced which excludes companies for whom their only employee is a director from claiming Employment Allowance. For more information click here 
  • Apprentices under 25 under circumstances will be given a new NI code of letter H: From 6 April 2016, if you employ apprentices under the age of 25 you may no longer need to pay employer Class 1 secondary National Insurance contributions (NICs) for them.
  • Micro Employer Easement Easement has ended. As of the the start of the 6th April 2016 this relief will no longer be applied. Any employer will have to submit their RTI on or before their payslip date. This means that if you pay your employees weekly you will have to submit to the revenue weekly, not monthly. For more information click here
  • Abolishment of Contracted Out Pension this abolishment also removes NI code letters D E I K and L. On 6 April 2016 the current basic state pension and state second pension (S2P) will be abolished and replaced by a single-tier state pension. The abolition of S2P will also mean the end of contracting-out. The measures to implement the single-tier state pension and abolition of contracting-out are contained in the Pensions Act 2014.Currently contracted-out schemes must provide a certain level of Defined Benefit (DB) benefits, sufficient to satisfy the statutory reference scheme test, and in return both employer and employees pay lower National Insurance Contributions (NICs). The abolition of contracting-out will therefore have cost implications for both employers and employees because of the loss of the NIC rebates. As a result, employers’ Class 1 NICs will increase by 3.4% (of relevant earnings) and employees’ Class 1 NICs will increase by 1.4% (of relevant earnings). The relevant earnings for this purpose being employees’ earnings between the Primary Threshold (£153 a week) and the Upper Accrual Point (£770 a week).
  • Student Loans Threshold Changes: Student Loans are taken out by university students during their time in education. These loans must be paid back when the person earns over a certain amount of money.

Published January 2016