MAJOR PAYROLL CHANGES FROM APRIL 2016
Employers are bracing themselves for major changes to employment taxes and reporting requirements from April this year.
A “tsunami” of government regulations come into effect this April requiring employers to urgently update their procedures and systems, as well as deal with a deluge of questions from concerned employees.
Dispensations from having to report reimbursed employees' expenses will vanish from April, but employers will still need to keep their records for up to four years in case of tax office enquiries, and robust systems will be needed to ensure compliance with the new regime. Any existing special agreements with the tax office must be reconfirmed with the department before the new tax year starts, to avoid them being lost.
The long-standing £8,500 employee benefits threshold is also abolished from April, ushering in the option of including certain benefits in the payroll. Employers taking this option will have to give employees an annual statement showing which benefits were included.
From April certain benefits costing £50 or less will be tax free, subject to an overall cap for directors of small companies of £300 per year.
Bishop Fleming partner, Will Hanbury, commented: “These changes to benefits should help to simplify the tax system in the long term, but in the short term employers are going to have to work out how to include them in their existing procedures”.
On top of pension auto-enrolment, other changes to pension tax rules this year will affect the Annual Allowance and the Lifetime Allowance, forcing employers to review their pension policies and explain to employees how their benefits will be affected.
Employers will also have to identify any staff who are under the age of 25, as from April there is no longer any employers' National Insurance Contributions (NICs) on their salaries.
Also from April the PAYE reporting concessions for employers with fewer than 10 workers will be scrapped, requiring them in future to report information to the tax office in real time on or before the date employees are paid.
The amount of employment allowance that businesses can set against their NIC payments increases from £2,000 to £3,000 in April, though companies with only one employee who is also a director will no longer be able to claim.
There is a new National Living Wage from 1 April 2016 of £7.20 per hour for workers aged 25 or older, whilst those aged below 25 continue to qualify for the national minimum wage. Employers will have to keep a check on workers' ages to ensure the correct rate is paid.
According to Mr Hanbury: “Changes are also planned for employee travel expenses, share schemes, car and van benefits, travel and subsistence relief for workers engaged via an agency, and salary sacrifice arrangements. From April next year large employers will be also hit with a new Apprenticeship Levy.”
He added: “On the horizon are possible changes to termination payments, employer-provided childcare and living accommodation, the employment status test, as well as further pension tax reforms, and the alignment of income tax with NIC.”
Mr Hanbury explained: “We are dealing with more and more enquiries from employers who are looking to outsource their employment duties because of increasing government red tape. We are supporting owner-managed business through this tsunami of change”.
To ease the burden on businesses of all these changes, Bishop Fleming has developed a specialist payroll bureau, as well as a “market-leading” auto-enrolment solution for employers.