UK Payroll Changes

National Insurance for Apprentices under 25 years old

Apprentices under 25 under circumstances will be given a new NI code of letter H. From 6 April 2016, if you employ an apprentice you may not need to pay employer Class 1 National Insurance Contributions (NICs) on their earnings below £827 a week (£43,000 a year).

They must be under 25 years old and following an approved UK government statutory apprenticeship framework (frameworks can differ depending on the UK country).

Student Loans Threshold Changes

Student Loans are taken out by university students during their time in education. These loans must be paid back when the person earns over a certain amount of money.

The existing student loan repayment threshold (annual £17,335) is known as repayment ‘Plan 1’ and refers to students who began their course prior to 1 September 2012. In addition to this threshold a new threshold of £21,000 will be introduced to handle the collection of the new Higher Education loans (England and Wales only) and accommodate 24+ Advanced Learning loans (England only). This will be known as repayment ‘Plan 2’ and as with current ICR loans, individuals will repay 9% of anything earned over the new annual threshold. Employees repaying under the existing Plan 1 threshold will be unaffected by the introduction of Plan 2.

Plan 1 and Plan 2 will not be repaid concurrently and employers will never be asked to operate more than one plan type at a time. In some cases a plan type could change in year and under these circumstances no stop notice will be issued to the employer. A Plan 2 SL1 (student loan start notice) will be issued which will indicate which type of plan should be operated and will also mean there is no interruption to loan repayments. The Plan 1 loan will in effect stop as soon as the Plan 2 SL1 is applied to payroll and the employee’s earnings exceed the relevant threshold.

If for whatever reason the employee has not been able to establish the plan type then Plan 1 should be operated until confirmation is received from the employee or HMRC; Plan 1 will always be the default plan. The Starter Checklist and the SL1 will continue to be the means of notifying student loan borrower status and loan plan type. The Starter Checklist will be amended for April 2016 so employers will be prompted to ask which type of plan their employee is on. Form P45 will only indicate whether an employee is already repaying a student loan, it will not indicate a plan type.

Tapered pension annual allowance

Whilst there are no limits on the amount that an individual can save into a registered pension scheme each year, there is a limit on the amount of tax relieved pension savings that can be made each year. This is the annual allowance.

Where pension savings are made in excess of the annual allowance plus any carry forward of unused annual allowance from the previous three years available to the individual, a tax charge is applied to the excess to recover the tax relief given on the excess savings.

The Annual Allowance is currently £40,000 and will remain at that figure for 2016/2017.

On 8 July 2015, the Chancellor announced that the government would be restricting tax relief for those whose income exceeded £150,000 by gradually tapering the Annual Allowance down to a minimum of £10,000.

The tapering will work in exactly the same way as for the tapering down of the Income Tax personal allowance. For every £2 of adjusted net income above £150,000 the Annual Allowance will be reduced by £1 down to a minimum Annual Allowance of £10,000.

The Government are focussing on high earners and so the regulations will not impact on any tax payer whose income after deducting pension contributions is below £110,000

The draft regulations also introduce requirements for the pension scheme administrator to provide information to the scheme member where the member’s pensionable earnings exceed £110,000 in the tax year, so the member has the information they need to determine whether or not they may be subject to a tapered annual allowance for 2016-17 onwards

Draft Regulations designed to bring this into effect have been laid and can be found here.

Tax Free Childcare to Replace Childcare Vouchers

Although it had originally been announced that the childcare vouchers scheme would be closed to new entrants from early 2017, the 2016 budget has extended this to April 2018. If you're already a member, though, you will be able to continue for as long as your employer runs the scheme, or as long as you stay with your employer.

And while this won't be a problem for many as a similar scheme, called Tax-Free Childcare, will replace the voucher scheme, SOME families who are eligible for vouchers, but aren't eligible for the new scheme will lose out massively.