Payroll Legislation

Find out how Payroll with Perks can help you keep on top of payroll legislation changes and keep your business is fully HMRC compliant.

Payroll legislation is subject to change – almost every year new legal requirements are introduced by HMRC which can completely change the responsibilities of payroll administrators.

No matter when an update in payroll legislation happens, it is essential that companies understand the changes and is able to apply them correctly. Failure to do so could have serious consequences for your business.

​Legislation changes for 2017/2018 tax year
Scottish rate of income tax
From 6 April 2016, employees who live in Scotland will receive a new tax code and pay the Scottish rate of income tax (SRIT). The Scottish taxpayer’s tax code will be the same as the UK tax code, but is prefixed with an S.

Tax rates & bands

The following table displays the new bands, effective from 6 April 2016:

RateFrom (£)To (£)Rest of UK RateScottish Rate
Basic Rate0.0132,000.0020%20%
Higher Rate32,000.01150,000.0040%40%
Additional Rate150,000.01N/A45%45%

The emergency tax code for 2016/2017 is 1100L.

From 6 April 2016, all L suffix tax codes increase by 40, M suffix tax codes increase by 44 and N suffix tax codes increase by 36.

If HMRC have sent you a P9 notice for any employees, change the tax code in the relevant employee record.

Employer national insurance (NI) contributions for apprentices under 25

From 6 April, you no longer have to pay employer’s NI contributions for apprentices under the age of 25, on earnings up to a new Apprentice Upper Secondary Threshold (AUST).

To accommodate this, you should use the new NI category, H, for apprentices under the age of 25.

If you have any employees aged under 25 who you employ as an apprentice, to ensure their NI calculates correctly, you must change their NI category before you process their pay in the new tax year.

NI Thresholds
Earnings LimitWeekly (£)Monthly(£)Yearly(£)
Lower Earnings Limit (LEL)112.00486.005,824.00
Primary Threshold (PT)155.00672.008,060.00
Secondary Threshold (ST) Employer threshold only156.00676.008,112.00
Upper Earnings Limit (UEL)827.003583.0043,000.00
Upper Secondary Threshold (UST)827.003583.0043,000.00
Apprentice Upper Secondary Threshold (AUST)827.003583.0043,000.00

For more information about the NI thresholds and rates for the 2016/2017 tax year, visit the HMRC website.

Statutory payment rates and thresholds
PaymentWeekly(£)Rate (%)
Statutory Maternity Pay (SMP)139.5890.00
Statutory Paternity Pay (SPP)139.58N/A
Statutory Paternity Pay Adoption (SPP)139.58N/A
Shared Parental Pay (ShPP)139.58N/A
Statutory Adoption Pay (SAP)139.5890:00
Statutory Sick Pay88.45N/A
NI employment allowance

​In April 2014, the government introduced employment allowance to enable businesses and charities to reduce their employer national insurance (NI) contributions.

On 6 April 2016, the employment allowance is increasing to £3,000. However, businesses with a sole employee who is also a director are no longer eligible for employment allowance. If you’re unsure whether or not you’re eligible for employment allowance in the 2016/2017 tax year, speak to HMRC.

If you’re eligible for employment allowance, you can claim it when you record your payment to HMRC and submit an EPS in the new tax year.

Student loan rates

From 6 April 2016, there are two types of student loan repayment plans; Plan 1 and Plan 2. 

For any loan repayments due from 6 April 2016, the SL1 notification from HMRC will specify which repayment plan the employee on. 

From 6 April 2016, when you set up a student loan deduction for an employee, you must specify whether they’re on Plan 1 or Plan 2. The repayments are then deducted based on the following thresholds:

TypeWeekly(£)Monthly(£)Annual(£)Rate (%)
Plan Type 1336.441457.9117,495.009.00
Plan Type 2403.841750.0021,000.009.00
Introduction of the national living wage from 1 April 2016

From 1 April 2016, the government introduces a new mandatory national living wage (NLW) for employees aged 25 and above. The rate from 1 April is £7.20 per hour, a 50p increase from the current national minimum wage of £6.70.

Remove The Headache of Constantly Changing Payroll Legislation

Failing to act when new payroll rules are introduced can be costly for any business. Changes, big and small, are always occurring, so it’s crucial that business owners and payroll staff stay up to date.

There are many ways to review new payroll legislation and check your payroll responsibilities as a business owner. Using an outsourced payroll service is a more cost-effective solution that provides 100% peace of mind that your company payroll is all taken care of – eliminating the need to constantly keep abreast of such critical business information.

At Payroll with Perks, we provide a full range of payroll services including payroll bureau services and managed payroll. These outsourcing solutions enable us take care of your company’s payroll responsibilities in order to free up valuable resources and remove the headache of keeping up with payroll legal requirements.

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