Saturday 19 March 2011

Payroll changes from April 2011

Payroll changes are afoot. The government is proposing changes effective from 5 April 2011. Small businesses should take care to ensure that they understand these changes and what it will mean for their business and employees.

P45 changes
Currently, post-P45 payments are subject to PAYE at basic rate (tax code “BR”) and any additional income due is accounted for through self-assessment. According to HMRC, this can result in employees paying less tax than is due, so from 6 April 2011, employers will need to use a new tax code for post-P45 payments. The new tax code, “0T”, means that employers must withhold income tax at the appropriate rate as if the departing employee is entitled to no allowances. Guidance on how employers are required to operate the new code is not yet available, although it is expected to be published shortly.

NICs increases
From 6 April, the rate of employees’ national insurance contributions (NICs) will be increased from 11% to 12% on earnings between the lower earnings limit (currently £110 a week but increasing to £139 a week) and the upper earnings limit (currently £844 a week but decreasing to £817 a week). NICs on earnings above the upper earnings limit will increase from 1% to 2%.

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