Tag Archives: payroll

Employment Allowance FAQ

The Employment Allowance gives your company the opportunity to reduce its annual National Insurance Employers’ Contributions bill by up to £3,000 a year. Its original aim was to encourage one-man bands to take on additional staff and, since launch, it has become one of the most claimed-for reliefs by British businesses.

It doesn’t apply to every company though so in this article, we will provide you with a rundown of the Employment Allowance and how it affects you.

Who can claim Employment Allowance?

From the start of the 2016/2017 tax year, Employment Allowance was withdrawn from one-person-only companies – companies where the director is the sole employee.

If you do have a member of staff, you will have to pay them a minimum of £157 a week (£680 a month/£8,164 a year) to qualify for Employment Allowance.

Employment Allowance can not be used for employing someone to work in your household – a nanny or a gardener for example.

Likewise, if you’re a service company and you’re on IR35 and your only income is the earnings of your intermediary (for example, a personal services company, limited company, or partnership), you can’t claim Employment Allowance.

If your company does more than half of its work for the public sector (schools, councils, NHS), you also may not enrol on the scheme.

What can my business claim with Employment Allowance?

Your £3,000 Employment Allowance is offset gradually against your secondary Class 1 National Insurance bill.

You start with £3,000 and every time you make a payment in secondary Class 1 National Insurance contributions (i.e when you are paying your staff), the amount you have left in your Employment Allowance account decreases.

That means that you only start paying secondary Class 1 National Insurance contributions once you’ve passed the £3,000 threshold. If your business paid £15,000 worth of secondary Class 1 National Insurance contributions in a year, the Employment Allowance would reduce the amount you actually pay to £12,000.

This is how your Employment Allowance is used

Let’s take an example of a company with annual secondary Class 1 National Insurance contributions of £4,200, paid at £350 per month…

Month Employers NIC that month Available Employment Allowance Allowance used in that month What you’d pay HMRC on the 22nd Your allowance carried forward
1 £350 £3,000 £350 Nil £2,650
2 £350 £2,650 £350 Nil £2,300
3 £350 £2,300 £350 Nil £1,950
4 £350 £1,950 £350 Nil £1,600
5 £350 £1,600 £350 Nil £1,250
6 £350 £1,250 £350 Nil £900
7 £350 £900 £350 Nil £550
8 £350 £550 £350 Nil £200
9 £350 £200 £200 £150 Nil
10 £350 Nil Nil £350 Nil
11 £350 Nil Nil £350 Nil
12 £350 Nil Nil £350 Nil

As each £350 payment is made, the amount left in the Employment Allowance account diminishes by the same amount. In month 9, when the £350 payment is made, the final £200 of the Allowance is used up meaning that you have to pay the balance of £150 (£350 minus £200) to HMRC by the 22nd of the month following.

How do I claim for Employment Allowance?

You claim for Employment Allowance through your payroll software. You only need to make the claim once and, each year, the Allowance will be reapplied to your HMRC PAYE account until you tell HMRC to stop.

Payroll is very complicated and for all clients, we recommend that you contact your Kelsall Steele accountant to run your payroll and take care of all payroll-related issues for you.

Employment Allowance – can I claim on previous years?

No, unfortunately not. This is a “use it or lose it” relief.

Contact Kelsall Steele about the Employment Allowance

For all Employment Allowance and payroll-related issues, please call us at any time on 01872 271655 or email enquiries@kelsallsteele.co.uk.

Auto-Enrolment and New Employers

New Employer from 1st October 2017?

Are you thinking about employing staff for the first time?  If you are I’m sure you’ve considered registering a PAYE scheme, arranging contracts, sorting out employer liability insurance and all the other ‘normal’ things that you would expect to have to put in place.  But did you know that if you become an employer for the first time on or after 1st October 2017 then you will immediately have Auto-Enrolment Duties to comply with?

What is Auto-Enrolment?

Under the Pensions Act 2008, every employer in the UK must put certain staff into a workplace pension and contribute towards it. For any new employer from 1st October 2017 these duties apply from the first day the first member of staff starts working for you.  This is known as your ‘Duties Start Date’.

What do you have to do?

Compliance with auto-enrolment means getting to grip with several responsibilities and processes:

  • Initial and ongoing assessment of all staff to determine whether they are Eligible Jobholders, Non-Eligible Jobholders or Entitled Workers.
  • Ensuring mandatory auto enrolment correspondence is provided to all staff advising them of how auto-enrolment impacts on them.
  • Enrolling all Eligible Jobholders into a qualifying pension scheme.
  • Processing any ‘Opt-Ins’ for employees who do not qualify to be auto-enrolled but who choose to join the scheme, and any ‘Opt-Outs’ for employees who have been auto-enrolled and do not want to be part of the scheme.
  • Notifying your chosen Pension Provider of all relevant payroll data each pay period.
  • Paying the Contributions due to your Pension Provider.

Lots of information supporting you with complying with the Duties can be found at the Pensions Regulator website. And, of course, if you decide that personally dealing with the administrative side of these responsibilities yourself is not the best use of your time then please do get in touch – we are more than happy to help with any element of your Payroll and Auto-Enrolment responsibilities.

Employment Allowance 2016/17

Employment Allowance is £3,000 for 2016/17

Did you know that from this tax year you can now get up to £3,000 off your National Insurance bill if you’re an employer? This has increased from the £2,000 allowance which could be claimed in both 2014/15 and 2015/16.

Not sure if you are eligible?

You can claim Employment Allowance if you’re a business or charity paying employers’ Class 1 National Insurance. You can also claim if you employ a care or support worker. However, you can only claim Employment Allowance for one PAYE scheme so if you’re part of a group, only one company or charity in the group can claim the allowance.

Directors, take note!

If you are the only employee in your company who has employer National Insurance deducted then the rules have changed this year and you are no longer eligible to claim the allowance. If you have claimed the allowance previously you need to make sure that you update your payroll records you reflect the fact that the business is no longer eligible and notify HMRC accordingly.

If you’ve never claimed Employment Allowance and think that you should have been then don’t panic, you can claim for a previous tax year dating back to 2014/15. For details on how to do his, or for any other information, you can visit the the https://www.gov.uk/claim-employment-allowance or get in touch with Lisa on 01872 271655 or by email at lisa.middleton@kelsallsteele.co.uk,who will be happy to help.

National Living Wage

One of the most notable announcements in this years’ Summer Budget was the introduction of a compulsory National Living Wage.

The new National Living Wage of £7.20 per hour will take effect from April 2016, being a top-up of 50p per hour to the National Minimum Wage (£6.70) for those employees aged 25 and over. The National Living Wage is set to increase each year, eventually hitting £9.00 per hour by 2020.

You may want to consider the cost implications of this for your business and importantly you may need to be aware that employees cannot make a ‘salary-sacrifice’ which takes them below the hourly minimum (£7.20) and you therefore may need to reconsider any existing or future sacrifice arrangements.

While many have been calling for the introduction of a ‘Living Wage’ for some time, it’s important to recognise the difference between the Chancellor’s’ newly announced National Living Wage and the Living Wage that is voluntarily paid by some employers.

The ‘other’ Living Wage that is talked about is calculated according to the basic costs of living in the UK by the Living Wage Foundation. There are two rates, a UK rate which is £7.85 and a London rate which is currently £9.15. Employers can choose to pay the Living Wage on a voluntary basis.

If you’d like any further information on the new National Living Wage, please don’t hesitate to contact us, enquiries@kelsallsteele.co.uk

National Minimum Wage Increases 2014

Minimum Wage

The annual update to the national minimum wage (NMW) came into effect from 1 October 2014 with the new rates being published as:

21 and over: £6.50

18 to 20: £5.13

Under 18: £3.79

Apprentice*: £2.73

The apprentice rate is for those apprentices aged 16 to 18 and those aged 19 or over who are in their first year.  All other apprentices are entitled to the minimum wage for their age.

It really doesn’t matter how small an employer is, they still have to pay the minimum wage. The NMW is worked out at an hourly rate even if the eligible worker is not paid by the hour. There is a handy online calculator to help work out if you are currently paying the correct minimum wage rate for your employees.

Accommodation

If you are an employer providing accommodation, the offset rate for accommodation (including rent, gas, electricity, furniture laundry) is £5.08 a day or £35.56 a week. You can find out more about employer provided accommodation on the gov.uk website

If you’d like any further information on the minimum wage increases you can contact Lisa Middleton, or email payroll@kelsallsteele.co.uk.

RTI: Why, when and how…

From April 2013 HM Revenue & Customs is introducing a new way of reporting PAYE. HMRC see RTI (Real Time Information) bringing the PAYE system into the 21st Century, making PAYE easier for employers, pension providers and themselves to administer. The following notes explain how this will impact on your business, your employees and how you should prepare for this change.

RTI Presentation Notes