Payroll Newsletter – February 2024

Conduct an Employee Data Integrity Review

As part of your year end processes, particularly from a GDPR perspective, we recommend that you review the integrity of your employee data to ensure it is complete, accurate and compliant.

Consider Employment Allowance Eligibility

In payroll we often find employers don’t know all the ins and outs of Employment Allowance. With that in mind, here are the 6 most common questions we receive about this allowance.

Can every company registered as an employer claim this allowance?

This allowance is aimed at small to medium employers, and the allowance is used to reduce the Employer’s National Insurance bill. Therefore, if your company has National Insurance levels of over £100,000 in the previous tax year, then the company will not be eligible for Employment Allowance.

I have several companies within a group – can each company claim employment allowance?

Only one company within a group (or with connected companies) can claim employment allowance, and the £100,000 employers National Insurance threshold must be measured across the entire group.

I’m a sole director – can my company claim this?

If there is only one person paid above the secondary National Insurance threshold, and this person is a company director, then employment allowance cannot be claimed. However, if there are several people on the payroll above this level, the company becomes eligible.

Do I have to pay back employment allowance?

Employment allowance does not have to be paid back to HMRC. This allowance is created to reduce the overall payroll cost of employing staff.

My business is unlikely to use the full £5,000 for the 2024/25 tax year – can I still claim?

Absolutely – the company does not need to use the full £5,000 in order to qualify.

Can I claim for previous years?

You can make a claim for the Employment Allowance up to 4 years after the end of the tax year in which the allowance applies.

What is de-minimis state aid and how does it affect employment allowance?

In simple terms, de-minimis state aid is financial support from the government, and for some businesses employment allowance counts towards their de-minimis state aid a limit.

If your business is in receipt of de-minimis state aid, you should have been told in writing.

There’s a limit to how much de-minimis state aid businesses can get over a 3-year period, so if they exceed the limit, they cannot claim Employment Allowance.

The aid limits are:

The decision to claim employment allowance is not always a straightforward matter, and it should not be left to your payroll team to decide. A link to further guidance is here but if you do require help with this, please get in touch.

Ensure your Apprenticeship Levy threshold is applied correctly

The Apprenticeship Levy is a tax that employers with a payroll bill of over £3 million must pay to the government to fund apprenticeship programs. The aim of the levy is to encourage more employers to offer apprenticeships and to increase the number of apprenticeships available.

The Apprenticeship Levy is set at 0.5% of an employer’s payroll bill, minus a £15,000 annual allowance. For example, if an employer had a payroll bill of £4 million, their Apprenticeship Levy liability would be £5,000. (0.5% of £4 million less £15,000 annual allowance).

Employers who are required to pay the Apprenticeship Levy are those with an annual payroll of over £3 million. This includes businesses, charities, and public sector organisations. The levy applies to all employers who meet this payroll threshold, regardless of whether they have apprentices or not.

However, if an employer is part of a group of connected companies, they will need to share the Apprenticeship Levy allowance with their group/connected companies. The total allowance for a group of connected companies is £15,000 per year, and the group can decide how to share between the connected companies.

Important Deadline – The decision on how to share this allowance between the companies in the group must be made at the start of the tax year and cannot be changed part-way through the year.

If you require more information or help with this, please get in touch. A link to further guidance is here.

Do you need to register for Payrolled Benefits in Kind?

Payrolled benefits in kind refers to non-cash benefits provided to employees by their employer that are included as payroll taxable income for the employee. Examples can include company cars, private medical insurance, gym memberships, and low-interest loans.

Payrolling employee Benefits in Kind means that the employer calculates the tax due on the benefit in kind and deducts it from the employee’s pay each pay period, rather than reporting it at the end of the tax year on a P11D form. This can help to spread the tax burden over the year for the employee, as well as reducing the administrative burden for the employer.

Payrolling Benefits in Kind was introduced by the UK government in April 2016 as an option for employers to simplify the reporting and payment of tax on these benefits for their employees. However, it is not mandatory, and employers can still choose to report employee benefits on the traditional P11D form.

Some advantages of payrolling employee benefits:

• Employers can ensure that tax calculations are done in real-time and are therefore more accurate, reducing the risk of unexpected tax liabilities at the year end.
• By payrolling Benefits in Kind, employees can see the value of their benefits on their payslips each month, rather than having to wait until the end of the year to see the tax impact. This can improve their understanding and appreciation of their benefits package.

Be aware that there are disadvantages too! Payrolling Benefits in Kind can be unsuitable in some situations and can end up causing more work for the employer. Benefits are being calculated every month rather than once per year, so you really have to weigh up if it is the right choice for your organisation.

Important Deadline – If you do decide to payroll your benefits in kind, you must remember to register with HMRC for this service before 6th April.

We have attached a link to further guidance here, however if you require help or further information on this topic, please get in touch.

Be prepared for the changes in National Minimum Wage

The national minimum wage is a legal requirement that employers in the United Kingdom must meet.

The national minimum wage in the UK is currently set at:

• £10.42 per house for workers aged 23 and over.
• For workers aged 21-22, the rate is £10.18 per hour.
• Those aged 18-20, the rate is £7.49 per hour.
• For workers under the age of 18, and apprentices the rate is £5.28 per hour.

These rates will increase 1st April 2024, and the new rates are set out below:

Not only is there a significant increase, but you will also notice the changes in age bands, meaning that workers aged 21 and over are now entitled to the full adult rate.

If you have employees who are paid at or around the minimum wage rate, you may wish to do some cash flow forecasting to assess the impact of this increase on your business.

Additionally, if you have any salary sacrifice arrangements, such as pension, cycle to work or childcare, this increase could potentially see the post-sacrifice pay for some employees fall below the National Minimum Wage level, so now is the time to look at this and check for potential issues.

Don’t forget to keep good record for National Minimum Wage Compliance

Are your employees being paid at least minimum wage? National Minimum Wage is more than just an hourly rate!

Many employers innocently make errors which can result in National Minimum Wage regulation breaches.

Did you know that, as employers, you have to take steps to ensure compliance? For instance:

• Ensure your workers are classified correctly and are paid appropriately for their classification.
• Recognise that not all payments count towards minimum wage.
• Early starts and late finishes must be paid, and accounted for where an annual calculation is required.
• Salaried worker employment contracts must be worded appropriately to support annual calculations.
• Deductions for uniforms can result in an employee being paid below the national minimum wage.

Penalties for non-compliance are significant and employers found to be in breach of the legislation are often named in the press.

A link to our webinar on this very important topic can be found here, and we also attached a link to HMRC’s guidance here.

If you would like to discuss this in more detail, please get in touch.

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