Changes for employers from April 2019
In this article we summarise the key changes that employers should be aware of from 6th April 2019.
Employment Allowance
Most businesses and charities qualify for the Employment Allowance, which is offset against the employer's National Insurance bill. The allowance is designed to help small businesses who want to hire their first employee or expand their workforce.
The 2019/20 employment allowance is set to stay the same, at £3,000.
But this is in addition to the National Insurance breaks for staff earning under the Secondary Threshold (set at £962 per week for 2019/20) and aged under 21 or apprentices under the age of 25.
Employees and Employers National Insurance
The point at which employees and employers start paying National Insurance continue to be aligned in 2019/20 but the threshold rises to £166 per week.
| PAYE tax rates and thresholds | Rate | 2019 to 2020 |
|---|---|---|
| Employee personal allowance | £240 per week £1,042 per month £12,500 per year |
|
| Basic tax rate | 20% | on annual earnings above the PAYE tax threshold and up to £37,500 |
| Higher tax rate | 40% | on annual earnings from £37,501 to £150,000 |
| Additional tax rate | 45% | on annual earnings above £150,000 |
Scotland - tax rates 2019/20
| PAYE tax rates and thresholds | Rate | 2019 to 2020 |
|---|---|---|
| Employee personal allowance | £240 per week £1,042 per month £12,500 per year |
|
| Scottish starter tax rate | 19% | on annual earnings above the PAYE tax threshold and up to £2,049 |
| Scottish basic tax rate | 20% | on annual earnings from £2,050 to £12,444 |
| Scottish intermediate tax rate | 21% | on annual earnings from £12,445 to £30,930 |
| Scottish higher tax rate | 41% | on annual earnings from £30,931 to £150,000 |
| Scottish top tax rate | 46% | on annual earnings above £150,000 |
Personal Allowance and Tax Code 2019/20
The personal allowance for 2019/20 rises to £12,500 from £11,850 in 2018/19. This should mean most employees in England and Northern Ireland have a tax code of 1250L unless they have less straightforward circumstances, such as adjustments in their tax code or multiple jobs/ pensions.
Employees who live in Scotland will have S1250L and those who live in Wales will have C1250L, as their basic tax code.
The responsibility for defining the income tax base, including the setting or changing of income tax reliefs and exemptions (including the Personal Allowance), continues to rest with the UK Government. Therefore, the Personal Allowance is the same for all UK taxpayers.
National Minimum Wage
The National Minimum Wage is the minimum pay per hour almost all workers are entitled to by law. The rates below apply from 1st April 2019:
- Aged 25 and above (national living wage rate) - £8.21
- Aged 21 to 24 inclusive - £7.70
- Aged 18 to 20 inclusive - £6.15
- Aged under 18 (but above compulsory school leaving age) - £4.35
- Apprentices aged under 19 - £3.90
- Apprentices aged 19 and over, but in the first year of their apprenticeship - £3.90
Workplace Pensions
Under the Pensions Act 2008, every employer in the UK must put certain staff into a workplace pension and pay into it. This is called 'automatic enrolment'.
The rules have gradually been phased in since 2012, with the largest employers going first. Most employers have now reached their 'staging date', and from October 2017 it has been mandatory for all new employers to automatically enrol their eligible staff into pension schemes.
The contribution levels will also gradually increase, and in April 2019 they will rise:
| Date | Employer minimum contribution | Total minimum contribution |
| Employer's staging date to 5th April 2018 | 1% | 2% |
| 6th April 2018 – 5th April 2019 | 2% | 5% |
| 6th April 2019 onwards | 3% | 8% |
Student loan and Postgraduate loan recovery
There are currently 3 types of student loan in operation as follows:
- Student Loan Plan 1 (SLP1) introduced from 6 April 2000
- Student Loan Plan 2 (SLP2) introduced from 6 April 2016
- Postgraduate Loan (PGL) introduced from 6 April 2019
You will receive a notification from HMRC as to when to start deducting these from your employees
| Rate or threshold | 2019 to 2020 rate |
|---|---|
| Employee earnings threshold for Student loan Plan 1 | £18,935 per year £1,577.91 per month £364.13 per week |
| Employee earnings threshold for Student loan Plan 2 | £25,725 per year £2,143.75 per month £494.71 per week |
| Student loan deductions | 9% |
| Employee earnings threshold for Postgraduate loan | £21,000 per year £1,750.00 per month £403.84 per week |
| Postgraduate loan deductions | 6% |
Company cars
Company cars are made available for private use by the employer to their staff or directors. The employee/ director is taxed on the value of the car, called a 'benefit in kind'. The benefit in kind for cars, is typically the car's list price multiplied by a percentage, which is normally dictated by the car's fuel type and CO2 emissions.
In a bid to discourage gas-guzzlers, from April 2019, the percentages applied will increase by 3% across the board*. This will mean a larger tax bill for the employees and more National Insurance for the employers. While this is some time away, you should consider this information before purchasing a car this year. If you are planning on updating your business fleet in the next couple of years, you should budget accordingly for the increase in National Insurance.
Employers To Do List
This list isn't comprehensive, but here are a few things employers need to be doing ahead of the new tax year starting on 6th April 2019:
- Make sure you're claiming the Employment Allowance if your business is eligible
- Make sure staff have the right National Insurance letter against them in your payroll software, to ensure their contributions are calculated correctly
- Make sure any Scottish and Welsh taxpayers have been identified on the payroll and that payroll processes are equipped to handle the tax calculations for Scottish and Welsh taxpayers
- Check tax codes have been updated
- Ensure payroll is updated for the new rates of national minimum wage
- Increase pension deductions for relevant staff in April
- Review budgets to ensure staff and pension costs are accurate
- Could fleet be changed for cars with lower emissions? If not, make sure budgets are updated for higher National Insurance liability for 2019/20+Payslips extended to all workers. Also hourly paid staff must receive payslips that state the number of hours they’re being paid for
We can help
If you would like to concentrate on running the business, we can assist you with complying with your duties as an employer.
Our payroll software is RTI-compliant and we’re able to offer our clients access to a pension scheme that is ready for auto enrolment. Needless to say, we can manage your day-today payroll requirements - even if your employees are on sick, maternity or paternity leave. We’ll also handle the payroll year end for you, including any benefits and expenses forms due.
Call us today at TaxAssist Accountants Daventry on 01327 304895 or use our online contact form to find out more about our services for employers and how they can benefit your business.
*Overview of Tax Legislation and Rates
Last updated: 20th September 2022