Changes for employers from April 2021
In this article we summarise what these changes mean for you, your business and your employees.
Employment Allowance
Most small businesses and charities qualify for the Employment Allowance, which is offset against the employers' Class 1 National Insurance bill. The allowance is designed to help businesses who want to hire their first employee or expand their workforce.
The 2021/22 employment allowance is £4,000.
But this is in addition to the National Insurance breaks for staff earning under the Secondary Threshold (set at £967 per week for 2021/22) and aged under 21 or apprentices under the age of 25.
What are the thresholds for employees and employers National Insurance?
Employees and employers start paying National Insurance at different thresholds. For 2021/2022 the threshold for employees rises to £184 per week and the threshold for employers is £170 per week.
What are the tax rates for England, Northern Ireland and Wales in 2021/22?
| Tax rates and thresholds | Rate | 2021 to 2022 |
|---|---|---|
| Employee personal allowance* | £242 per week £1,048 per month £12,570 per year |
|
| Basic tax rate | 20% | on annual earnings above the PAYE tax threshold and up to £37,700 |
| Higher tax rate | 40% | on annual earnings from £37,701 to £150,000 |
| Additional tax rate | 45% | on annual earnings above £150,000 |
What are the tax rates for Scotland in 2021/22?
| Tax rates and thresholds | Rate | 2021 to 2022 |
|---|---|---|
| Employee personal allowance* | £242 per week £1,048 per month £12,570 per year |
|
| Starter tax rate | 19% | on annual earnings above the PAYE tax threshold and up to £2,097 |
| Basic tax rate | 20% | on annual earnings from £2,098 to £12,726 |
| Intermediate tax rate | 21% | on annual earnings from £12,727 to £31,092 |
| Higher tax rate | 41% | on annual earnings from £31,093 to £150,000 |
| Top tax rate | 46% | on annual earnings above £150,000 |
* The income limit for the personal allowance is £100,000 per year. The Personal Allowance reduces where the income is above £100,000 – by £1 for every £2 of income above the £100,000 limit.
Personal Allowance and Tax Code 2021/22
The personal allowance for 2021/21 rises to £12,570 from £12,500. This means that most employees in England and Northern Ireland should have a tax code of 1257L.
Some employees will have a different tax code, which could be for a number of reasons such as:
- The employee has more than one job
- Other income is being received, for example pensions
- The employee receives benefits in kind
It’s important that the tax code is checked, to ensure that the correct amount of PAYE is deducted.
Employees who live in Scotland will have S1257L and those who live in Wales will have C1257L, as their basic tax code.
The responsibility for setting 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.
What is the 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 2021:
- Aged 23 and above (national living wage rate) – £8.91
- Aged 21 to 22 inclusive – £8.36
- Aged 18 to 20 inclusive – £6.56
- Aged under 18 (but above compulsory school leaving age) – £4.62
- Apprentices aged under 19 – £4.30
- Apprentices aged 19 and over, but in the first year of their apprenticeship – £4.30
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 have remained the same for 2021/22, and in April 2021 they will be a total of 8% minimum contribution with 3% minimum coming from the employer.
Student Loan and Postgraduate Loan Recovery
There are currently 4 types of student loan in operation as follows:
- Student Loan Plan 1 (SLP1) introduced from 6th April 2000
- Student Loan Plan 2 (SLP2) introduced from 6th April 2016
- Postgraduate Loan (PGL) introduced from 6th April 2019
- Student Loan Plan 4 (SLP4) introduced from 6th April 2021
You will receive a notification from HMRC as to when to start deducting these from your employees.
| Rate or threshold | 2021 to 2022 rate |
|---|---|
| Employee earnings threshold for Student loan Plan 1 | £19,895 per year £1,657.91 per month £382.59 per week |
| Employee earnings threshold for Student loan Plan 2 | £27,295 per year £2,274.58 per month £524.90 per week |
| Employee earnings threshold for Student loan Plan 4 |
£25,000 per year |
| Student loan deductions on earnings above threshold | 9% |
| Employee earnings threshold for Postgraduate loan | £21,000 per year £1,750.00 per month £403.84 per week |
| Postgraduate loan deductions on earnings above threshold | 6% |
Statutory Maternity, Paternity, Adoption, Shared Parental and Parental Bereavement Pay
These rates apply from 4th April 2021.
| Type of payment or recovery | 2021 to 2022 |
|---|---|
| Statutory Maternity Pay (SMP) – weekly rate for first six weeks |
90% of the employee’s average weekly earnings |
| Statutory Maternity Pay (SMP) – weekly rate for remaining weeks | £151.97 or 90% of the employee’s average weekly earnings, whichever is lower |
| Statutory Paternity Pay (SPP) – weekly rate | £151.97 or 90% of the employee’s average weekly earnings, whichever is lower |
| Statutory Adoption Pay (SAP) – weekly rate for first six weeks | 90% of employee’s average weekly earnings |
| SAP – weekly rate for remaining weeks | £151.97 or 90% of the employee’s average weekly earnings, whichever is lower |
| Statutory Shared Parental Pay (ShPP) – weekly rate | £151.97 or 90% of the employee’s average weekly earnings, whichever is lower |
| Statutory Parental Bereavement Pay (SPBP) – weekly rate | £151.97 or 90% of the employee’s average weekly earnings, whichever is lower |
| SMP, SPP, ShPP, SAP or SPBP – proportion of your payments you can recover from HMRC | 92% if your total Class 1 National Insurance (both employee and employer contributions) is above £45,000 for the previous tax year 103% if your total Class 1 National Insurance for the previous tax year is £45,000 or lower |
Statutory Sick Pay (SSP)
The same weekly SSP rate applies to all employees. However, the amount you must actually pay an employee for each day they’re off work due to illness (the daily rate) depends on the number of ‘qualifying days’ they work each week.
There are also still special measures in place for coronavirus. Please see HMRC website here for further information.
In addition you can reclaim up to two weeks’ SSP if all of the following apply:
- your employee was off work because they had coronavirus, were self-isolating or shielding
- your PAYE payroll scheme started on or before 28th February 2020
- you had fewer than 250 employees on 28th February 2020
You can reclaim up to the SSP threshold a week for each employee. You cannot reclaim SSP if your employee is off sick for any other reason.
Below are the rates:
| Unrounded daily rates | Number of qualifying days in week | 1 day to pay | 2 days to pay | 3 days to pay | 4 days to pay | 5 days to pay | >6 days to pay | 7 days to pay |
|---|---|---|---|---|---|---|---|---|
| £13.7642 | 7 | £13.77 | £27.53 | £41.30 | £55.06 | £68.83 | £82.59 | £96.35 |
| £16.0583 | 6 | £16.06 | £32.12 | £48.18 | £64.24 | £80.30 | £96.35 | - |
| £19.2700 | 5 | £19.27 | £38.54 | £57.81 | £77.08 | £96.35 | - | - |
| £24.0875 | 4 | £24.09 | £48.18 | £72.27 | £96.35 | - | - | - |
| £32.1166 | 3 | £32.12 | £64.24 | £96.35 | - | - | - | - |
| £48.1750 | 2 | £48.18 | £96.35 | - | - | - | - | - |
| £96.35 | 1 | £96.35 | - | - | - | - | - | - |
Company cars: advisory fuel rates
Use advisory fuel rates to work out mileage costs if you provide company cars to your employees.
Use the rates when you either:
- reimburse employees for business travel in their company cars
- need employees to repay the cost of fuel used for private travel
You must not use these rates in any other circumstances.
These rates apply from 1st March 2021.
| Engine size | Petrol – amount per mile | LPG – amount per mile |
|---|---|---|
| 1400cc or less | 10p | 7p |
| 1401cc to 2000cc | 12p | 8p |
| Over 2000cc | 18p | 12p |
| Engine size | Diesel – amount per mile |
|---|---|
| 1600cc or less | 9p |
| 1601cc to 2000cc | 11p |
| Over 2000cc | 12p |
Hybrid cars are treated as either petrol or diesel cars for this purpose.
Employers To Do List
This list isn't comprehensive, but here are a few things that employers need to do following the start of the new tax year, which began on 6th April 2021:
- 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
- Review budgets to ensure staff and pension costs are accurate
- Could fleet cars be changed for vehicles with lower emissions?
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-to-day 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 on 01793 261899 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