National Insurance Contributions Changes

NI Card PictureFor Employees

From 6 July 2022, as an employee you will be able to earn more before you start paying National Insurance. This means you may pay less tax, after accounting for the recent Health and Social Care Levy.

You can use this tool to get an estimate if you’re employed and paid the same amount monthly, by your employer through the PAYE system.

Click here to start

 

For Employers

The Primary threshold from 6 July 2022 to 5 April 2023 will be £242 per week and £1,048 per month, equivalent to £12,570 per year (increased from £9,880 per year).

PAYE tax and Class 1 National Insurance contributions

You normally operate PAYE as part of your payroll so HMRC can collect Income Tax and National Insurance from your employees.

Your payroll software will work out how much tax and National Insurance to deduct from your employees’ pay.

Tax thresholds, rates and codes

The amount of Income Tax you deduct from your employees depends on their tax code and how much of their taxable income is above their Personal Allowance.

England and Northern Ireland

PAYE tax rates and thresholds 2022 to 2023
Employee personal allowance £242 per week
£1,048 per month
£12,570 per year

Introduction to PAYE

HMRC PAYE jpegAs an employer, you normally have to operate PAYE as part of your payroll. PAYE is HM Revenue and Customs’ (HMRC) system to collect Income Tax and National Insurance from employment.

You do not need to register for PAYE if none of your employees are paid £120 or more a week, get expenses and benefits, have another job or get a pension. However, you must keep payroll records.

Payments and deductions

When paying your employees through payroll you also need to make deductions for PAYE.

Payments to your employees

Payments to your employees include their salary or wages, as well as things like any tips or bonuses, or statutory sick or maternity pay.

Deductions from their pay

From these payments, you’ll need to deduct tax and National Insurance for most employees. Other deductions you may need to make include student loan repayments or pension contributions.

Reporting pay and deductions

If you run payroll yourself, you’ll need to report your employees’ payments and deductions to HMRC on or before each payday.

Your payroll software will work out how much tax and National Insurance you owe, including an employer’s National Insurance contribution on each employee’s earnings above £170 a week.

You’ll need to send another report to claim any reduction on what you owe HMRC, for example for statutory pay.

Paying HMRC

You’ll be able to view what you owe HMRC, based on your reports. You then have to pay HMRC, usually every month.

If you’re a small employer that expects to pay less than £1,500 a month, you can arrange to pay quarterly – contact HMRC’s payment enquiry helpline.

Other things to report

As part of your regular reports, you should tell HMRC when a new employee joins and if an employee’s circumstances change, for example they reach State Pension age or become a director.

You have to run annual reports at the end of the tax year – including telling HMRC about any expenses or benefits.

More details can be found here

PAYE Form P60 for your employees

Form P60 pictureIf you employ staff, you must give all employees a P60 at the end of each tax year, if they are working for you on 5 April.  This must provide this by 31 May, on paper or electronically.  You can either:

You can’t download blank P45 and P60 forms.

Contact HMRC if you have problems ordering online, your order hasn’t arrived in 7 working days, or to order by telephone 0300 123 1074.

A P60 shows an employee the tax that has been paid on their salary during the tax year (6 April – 5 April).  They will get a separate P60 for each of their jobs.

They need this P60 to prove how much tax they have paid on their salary, for example:

  • to claim back overpaid tax
  • to apply for tax credits
  • as proof of their income if they apply for a loan or a mortgage

They can check how much tax they paid last year if they think they might have paid too much (https://www.gov.uk/check-income-tax-last-year)

Student Loan Repayments for 2 or more jobs

Student Loan RepaymentYou’ll only repay your student loan when your income is over the threshold amount for your repayment plan 

The threshold amounts change on 6 April every year

From 6 April 2020, the repayment threshold for pre-2012 (Plan 1) loans will rise to £19,390.

The repayment threshold for post-2012 (plan 2) loans will rise to £26,575 from 6 April 2020 to 5 April 2021.

Student Loan Repayment if you have 2 or more jobs

If you’re employed, your repayments will be taken out of your salary. The repayments will be from the jobs where you earn over the minimum amount, not your combined income.

Example

You have a Plan 1 loan.

You have 2 jobs, both paying you a regular monthly wage. Before tax and other deductions, you earn £1,000 a month from one job and £800 a month for the other.

You will not have to make repayments because neither salary is above the £1,577 a month threshold.

Example

You have a Plan 2 loan.

You have 2 jobs, both paying you a regular monthly wage. Before tax and other deductions, you earn £2,300 a month from one job and £500 a month for the other.

You will only make repayments on the income from the job that pays you £2,300 a month because it’s above the £2,143 threshold.

Starting a New Employee

HMRC Starter ChecklistYou usually have to pay your employees through PAYE if they earn £118 or more a week (£512 a month or £6,136 a year).You must tell HMRC about your new employee on or before their first pay day.
  1. Tell HMRC about a new employee.
  2. Get their personal details and P45 to work out their tax code.
  3. If you don’t have their P45, use HMRC’s ‘starter checklist’
  4. Check what to do when you start paying your employee.

You only need a starter checklist from your employee to work out their tax code if they do not have a P45, or if they left their last job before 6 April 2018.

You do not need to operate PAYE on volunteers if they only get expenses that are not subject to tax or National Insurance

Operate PAYE on students in the same way as you do for other employees.

Student loan repayments

You should make student loan deductions if any of the following apply:

  • your new employee’s P45 shows that deductions should continue
  • your new employee tells you they’re repaying a student loan, for example on a starter checklist
  • HM Revenue and Customs (HMRC) sends you form SL1 or form PGL1 and your employee earns over the income threshold for their loan

More details can be found here

Claiming Employment Allowance for earlier tax years

Related imageYou can make a claim for the Employment Allowance up to 4 years after the end of the tax year in which the allowance applies. For example, if you want to make a claim for the allowance for the tax year 2015 to 2016 (that tax year ends on the 5 April 2016), you must make your claim by no later than the 5 April 2020.

You will need a separate Employment Payment Summary (EPS) for each year’s claim when claiming for any tax years that have now ended. You don’t need to send previously reported EPS figures, such as statutory payments.

If you send your claim one year after the tax year has ended, your claim will continue into the current tax year, unless you already have a claim for the Employment Allowance in place that year. If you have paid your PAYE up to date, HMRC will set any Employment Allowance award against your future or existing PAYE liabilities, unless you ask them to refund the amount.

Further information and details can be found here

PAYE and Payroll for Employers

Who We AreCheck what your charity needs to do as an employer before you can take on staff by following these  six essential steps to follow:

  1. Decide what type of employee you need, and check you can afford to take on employees
  2. Make your workplace safe and accessible for employees
  3. Register as an employer and set up PAYE
  4. Check your responsibilities around workplace pensions
  5. Get Employers’ Liability insurance
  6. Recruit and employ staff

You can find out much more here

How to Register as an Employer with HMRC

You normally need to register as an employer with HM Revenue and Customs (HMRC) when you start employing staff, or using subcontractors for construction work.

You must register even if you’re only employing yourself, for example as the only director of a limited company.

You must register before the first payday. It usually takes up to 5 days to get your employer PAYE reference number. You can’t register more than 2 months before you start paying people.

If your business starts employing people on or after 6 April, you’ll get your employer PAYE reference number by 17 May.

To pay an employee before you get your employer PAYE reference number, you should:

  1. Run payroll
  2. Store your full payment submission
  3. Send a late full payment submission to HMRC

More information and help can be found here

Closing your PAYE Scheme

You need to tell HM Revenue and Customs (HMRC) straight away if you stop employing people.

Closing your PAYE scheme

You need to submit a final payroll return – either a Full Payment Submission (FPS) or Employer Payment Summary (EPS). You should:

  • deduct and pay any outstanding tax and National Insurance to HMRCwithin 17 days (or 14 if you’re paying by cheque)
  • select the ‘Final submission because scheme ceased’ box
  • put the date you closed your PAYE scheme in the ‘Date scheme ceased’ box – you can’t put a date in the future

You also need to:

  • send your expenses and benefits returns
  • enter a leaving date on each employee’s payroll record
  • give your employees a P45 on their last day – most payroll software can produce a P45 for you or you can order them from HMRC

If you start employing anyone in the same or next tax year, you should reopen your PAYE scheme by sending an FPS with your PAYEreference.

If you temporarily stop employing staff

Your PAYE scheme continues to run if you stop employing staff for less than a whole tax year (eg if you run a seasonal business). You don’t need to give your employees a P45 if you keep them on your payroll.

More details can be found here