With the start of a new tax year on 6 April 2019, there are some changes to bear in mind going forward.
PAYE and NICs – Scotland v rUK
There is an acceleration in the increase in the personal allowance from £11,850 up to £12,500. Originally expected to rise to this level by 2020/21, this increase has been brought forward to April 2019. There have also been increases in the basic rate and National Insurance thresholds which are all set to benefit the taxpayer.
Although the personal allowance is decided by the UK government, income tax thresholds are determined by devolved parliaments. The rates payable by Scottish taxpayers are out of sync from rUk in the 2019/20 tax year with 5 income tax rates adding considerable complexity. Tax rates are determined by where the tax payer resides, not where they work and are indicated on tax codes by a prefix of “S” for Scottish taxpayers. HMRC will notify employers of any amendments via P6 or P9 notices.
|Scottish rates||Rate||Taxable income band||Tax on band|
|Starter rate||19||First £2,049||389.50|
|Basic rate||20||Next £10,395||2,078.80|
|Intermediate rate||21||Next £18,486||3,882.06|
|Higher rate||41||Next £119, 070||48,818.70|
Pensions & Scottish Taxpayers
“Net Pay” pension schemes members have their pension contributions deducted before Income Tax is applied to their pay and are therfore largely unaffected by the above noted devolved Scottish tax changes.
However, pension schemes using the “at source” mechanism, will continue to claim tax relief at the rate of 20% for members who are Scottish taxpayers. For pension scheme members who are Scottish taxpayers liable to income tax at no more than the Scottish starter rate of 19%, or who pay no tax, current tax rules will continue to apply. This means that scheme administrators will continue to claim relief at 20% in respect of these individuals, and HMRC will not recover the difference between the Scottish starter and Scottish basic rate.
Scottish taxpayers liable to income tax at the Scottish intermediate rate of 21% will be entitled to claim the additional 1% relief due on some or all of their pension contributions above the 20% tax relief paid to their scheme administrators. HMRC have indicated that whilst they will not be able to correct this directly with the pension scheme, they will adjust the tax code to provide tax relief through the payroll.
Scottish taxpayers liable to Income Tax at the Scottish higher rate (41%) and Scottish top rate (46%) will be able to claim additional relief on their contributions up to their marginal rate of tax. This should be done either in their Self-Assessment tax return or by contacting HMRC.
April 2019 sees the final increase in the Automatic Enrolment minimum pension contributions rate. From April, the minimum contribution rate increases to 8% of which a minimum of 3% must be an employer contribution.
There are increases to the thresholds for both Plan 1 and Plan 2 Student Loan deductions. April 2019 will also see the first Post Graduate Loan (PGL) deductions. Employers will continue to apply student loan deductions based on the information contained within the P45, Starter Checklist or SL1 notice from HMRC. Instructions to operate a PGL will come from HMRC in the form of PGL1 notification.
National Minimum Wage and Statutory Payments
Increases to the National Minimum Wage across all age groups take place from 1 April 2019. The new rates are as follows:
Aged 25 and above £8.21
Aged 21-24 £7.70
Ages 18-20 £6.15
Aged under 18 £4.35
(but above compulsory school leaving age)
Apprentices aged under 19 £3.90
Apprentices aged 19 and over £3.90
(but in the first year of their apprenticeship)
Increases for statutory payments such as Statutory Maternity, Paternity, Adoption and Shared Parental Pay and Statutory Sick Pay take place from 6 April 2019.
From April 2019, the statutory right to receive an itemised payslip will be extended to all workers, not just employees. For those whose pay varies depending on the number of hours worked, their payslip must show the amount of time they are being paid for. Employees are defined under the Employment Rights Act 1996.
Increases of 3% on the calculation percentages used on all CO2 emission rates and an increase in the fuel benefit charge will see company car drivers pay more for their benefit. The diesel surcharge increased from 3% to 4% from April 2018. However, new diesels that comply with the Euro 6d emissions standard (also referred to as RDE2) do not attract this surcharge. With Euro 6d testing not being mandatory on new cars until January 2021, it is unlikely that diesel company car drivers will benefit from this just yet.
For 2019/20, the 3% increase applies to all cars including electric and Ultra Low Emissions Vehicles (ULEV’s). ULEVs are cars with CO2 emissions below 75g/km. However, from 2020/21 all electric cars attract a benefit in kind percentage of just 2% – a reduction from 16% in 2019/20. The calculation percentage of hybrid cars will be assessed by the number of miles they can be driven in all-electric mode ranging from 2% for electric range of over 130 miles to 14% for less than 30 miles. These represent significant savings for the tax payer and worth considering if you’re looking to change company car soon.
Other expenses and benefits
Employers who reimburse subsistence costs at HMRC benchmark rates will no longer have to check receipts from April 2019. However, they will still need to keep records demonstrating the expense was incurred for qualifying business purpose.
Currently where employers pay contributions to a life assurance policy or a qualifying recognised overseas pension scheme (QROPS) and the beneficiary is the employee (or certain members of the employee’s family), no benefit in kind exists. From April 2019 this exemption is extended such that the provision of death or retirement benefits will not be subject to tax when the beneficiary is any individual or a registered charity.
Following the Independent Taylor Review of Modern Working Practices and the subsequent release of the Good Work Plan, the gig economy and employment status continue to receive attention. There have been promises of clearer guidance from HMRC along with developments to its Employment Status Indicator tool but with many cases still being decided by the courts, uncertainty looks likely to continue into 2019/20 and beyond.
The Good Work Plan also outlined changes to the holiday pay reference period for the calculation of holiday from 12 weeks to 52, a ban on employers making deductions from tips and gratuities and a right to a written statement outlining contract and rights from day one for all workers, not just employees.
Whilst there remains much uncertainty ahead, there are some changes already announced for April 2020. These include:
- extension to the off-payroll working legislation to those engaged through personal service companies to most of the private sector
- Secondary Class 1 NICS (employers) payable on termination and redundancy payments above £30,000
- Executive Pay Ratio reporting
For more information, contact:
0141 886 6644
The information in this article should not be regarded as financial advice. This is based on our understanding in April 2019. Laws and tax rules may change in the future.