As always with the new tax year just around
the corner, we are busy preparing for the
up-coming changes that the 6th of April
2014 will bring.
So what are these changes?
Pay As You Earn (PAYE) tax codes
The basic tax code will be increasing from
944L to 1000L. Put simply this means that
£192.00 per week of your contractors take home pay will not be subject to PAYE deductions.
The basic tax rate will remain at 20% on annual earnings above the tax threshold, and up to the amount of £31,865.
The higher tax rate will remain at 40% on annual earnings from £31,866 up to £150,000.
The additional tax rate is at 45% on annual earnings above £150,000.
National Insurance has been in the press recently as some MP's are looking to re-brand NI as 'earnings tax' and to eventually merge it with income tax. The industry hot topic is set to develop further during the 2nd discussion reading, which provides the first opportunity for members of the Lords to debate the key principles and main purpose of the bill and to flag up any concerns or specific areas where they think changes are needed.
The national insurance thresholds for the new financial year 2014/15 are as follows;
- The lower earnings limit is now £111 pw
- The primary threshold for employees is now £153 pw
- The secondary threshold for employers is now £153 pw
- The upper accrual point remains the same at £770 pw
- The upper earning limit is now £805 pw
So what does the new financial year have in store for statutory payments? The statutory payments including Statutory Maternity Pay (SMP), Ordinary Statutory Paternity Pay (OSPP) and Statutory Adoption Pay (SAP) have all increased by £1.40 from £136.78 to £138.18 for those who qualify.
Statutory Sick Pay has increased by £0.85 from £86.70 to £87.55 for the 2014/15 financial year. The main knock on effect that statutory payments will have is a slight increase in take home pay for employees.
More detailed information on statutory payments can be found here.
The new tax year has also brought changes to student loan recovery. The student loan threshold has increased from £314.71 to £325.19 per week. So from 6th April 14 any earnings over £314.71 pw will be subject to 9% student loan recovery (if applicable).
Please visit here, for more detailed information on rates and thresholds.
The Department for Work and Pensions corporate website (DWP) has recently announced the proposed annual earnings thresholds for the 2014 - 2015 tax year. From 6th April 2014 the earnings trigger for automatic enrolment has increased from £182 pw to £192 pw and contractors will pay contribution on qualifying earnings over £111 at a rate of 0.8% for those that have a National Insurance number.
The expected values by pay reference period (updated January 2014)
2014 - 2015
Lower level of qualifying earnings
1 week: £111 1
Earnings trigger for automatic enrolment
1 week: £192
1 Month: £833
Upper level of qualifying earnings
1 week: £805
1 Month: £3,489
The P60 is an end of year certificate which highlights the tax you've paid in the tax year 6th April 2013 to 5th April 2014. Your employer should send the P60 form to you.
Your P60 could be useful if you need to:
- complete a Self-Assessment tax return, if this applies to you
- claim back any Income Tax or National Insurance contributions you've overpaid
You may also need it as proof of your income if you apply for a loan or a mortgage - so it's important to keep all your P60s in a safe place.
The government has approved a rise in the National Minimum Wage to £6.50 per hour from the 1st October 2014, that's a 19p (3%) increase in the adult rate, with more than 1 million people set to see their pay rise by as much as £355 a year.
Business Secretary Vince Cable has accepted in full the independent Low Pay Commission's recommendations. The LPC has said this rise is the first real terms cash increase since 2008 which is both manageable for employers and will also support full employment.
Employment Allowance for Limited Companies
The Chancellor's announcement back in 2013 was to support small business by the introduction of an 'employment allowance' that can reduce your employer Class 1 NICs.
For example if a PSC contractor currently paying themselves a weekly wage of £150 choosing to increase this to £190 and claims the allowance, will save on average £150 per year in tax liabilities!
PayStream's dedicated accounts team will send your contractors their engagement letter for the new financial year. Contractors will be able to claim this allowance via the engagement letter. The allowance will be claimed as part of the normal payroll process through RTI which we submit on your contractor's behalf.
Most businesses are eligible for the Employment Allowance; however there are a small number of businesses and organisations that can't claim.