5 new tax year changes

Mar7

Posted in News

changes ahead

As another end of financial year steams into view (already?) we look at the changes you’ll need to making to your payroll in preparation for 2016/17.

National Living Wage

From 6 April 2016, the National Living Wage (NLW) comes into effect. It’s mandatory and it applies to anyone over 25. Effectively, the NLW is a 50p ‘top-up’ of the National Minimum Wage (NMW) paid to 25s and over. So the NMW rate from 6 April will be £6.70, while the NLW rate will be £7.20.

If you’re running in-house payroll, your software should change automatically, but check with the supplier before the new tax year to make doubly sure. If you’re outsourcing your payroll, it should all be managed for you.

The end of contracted out pensions

Around 2,500 private employers operate open, contracted out salary-related pension schemes.

From 6 April 2016, this ‘additional State Pension’ will cease and a new State Pension will deliver what the government describes as “a clearer State Pension for future pensioners.”

To find out whether you’re affected, ask your payroll provider and/or talk to your pensions advisor about the changes you may need to make.

The end of some NI categories

As a result of the above, NI categories D and E will no longer be used. Employees on these codes will switch to standard rate equivalents.

If you’re running in-house payroll, your software should change automatically, but check with the supplier before the new tax year just in case. If you’re outsourcing your payroll, it should all be managed for you.

The start of some new NI categories

Apprentices under the age of 25 will, from 6 April, attract a zero NI employer contribution rate on earnings up to the upper earnings limit. New NI categories G and H will be used to administer the change.

If you’re operating your payroll in-house, you may need to make some manual adjustments to take account of the change.  If you outsource your payroll it may all happen automatically, but it is worth checking with your provider to ensure they have all the data they need.

What does the S code mean?

From 6 April, an S tax code denotes a Scottish taxpayer. From a practical aspect it shouldn’t make any difference to the way you process pay. Just use the code you’re given.

If you need help with any of the above – or would prefer to let someone else make all the changes – you can talk to us about outsourcing your payroll here.