As of 6th April the new PAYE year begins, and changes to tax codes, NI contributions and a living wage come in force. Below are all the changes which you should be aware of:

  1. Tax code changes
    1. All tax codes ending ‘L’ are seeing a 40 digit uplift. This means that a code which was 1000L in 2015-16, will become 1040L for the 2016-17 year
  2. Employer NI contributions for apprentices
    1. National Insurance Contributions from Employers for Apprentices under 25 will no longer have to pay Class 1 secondary NICs on earnings up to the “Apprentice Upper Secondary Threshold” (AUST). AUST value for 2016-17 will be the same as the Upper Earnings Limit, or £827/week, £3583/month, £43000/year.
    2. All apprentices under 25 on the payroll will need their NI table letters changing to a letter H.
    3. An apprentice with a NI letter of H can earn up to £3583/month before an employer must pay NIC.
  3. End of contracting out of State pension
    1. If employees are contracted out of the state pension then as of the 6th April 2016, must be brought back into the state pension through a change of their NI table letter. The details of this change are listed below.
      1. Employees previously listed as D must be reassigned to A
      2. Employees previously listed as E must be reassigned to B
      3. Employees previously listed as L must be reassigned to J
      4. Employees previously listed as I must be reassigned to M
      5. Employees previously listed as K must be reassigned to Z
  4. Employment Allowance increase
    1. Employment Allowance will increase from £2000 (2015-16) to £3000 (2016-17). If you have claimed Employment Allowance for the 2015-16 year, then your payroll manager will ask if you wish to claim it for this year.
    2. Some groups are unable to claim Employment Allowance for this year so if you require guidance on this then contact HMRC
  5. Student Loan repayments
    1. As of 6th April there will be2 different student loan repayment plans each with a different threshold for repayment.
    2. Plan 1 means repayments start at £17495
    3. Plan 2 means repayments start at £21000
    4. When notification comes from HMRC that repayments must start they will state what the payment plan is.
  6. Payrolling Benefits in Kind
    1. HMRC is introducing a new voluntary framework to which means employers can payroll most employee benefits in kind (BiKs). Payrolling is where the employer includes a notional value for employee BiKs as taxable pay in real time.
    2. For more information about Payrolling see Tax your employees’ benefits and expenses through your payroll
  7. National Living Wage
    1. Lastly, a very important change. As of 1st April 2016, a new living wage for all employees aged 25 and over is coming into force. This means that all employees who fall into this criteria now must be paid a minimum of £7.20. Your Payroll Manager should handle this for you.

If you have any queries, or require any help with your PAYE please do not hesitate to contact us on 01482 210876.

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