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New Employers and automatic enrolment

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Taking on staff is an essential part of growing a business and there are several things to consider, including automatic enrolment. Aside from checking whether you need to register as an employer with HMRC; checking if your employee has the legal right to work in the UK and taking out employer’s liability insurance, you will also need to understand your automatic enrolment dates and duties.

The date that your duties start will depend on when you employ your first worker, as this date determines whether you will have a staging date, or whether your duties will begin immediately your member of staff starts work. Automatic enrolment duties apply to all employers. If you start a new PAYE scheme between April 2012 and 30 September 2017 your staging date will be between 1 May 2017 and 1 February 2018. If you become an employer now and don’t use a PAYE scheme to pay your staff, then you will not have a staging date. If your staff earn below £113 per week or £490 per month, HMRC may not require you to set up a PAYE scheme but you still have certain automatic enrolment duties and must start them as soon as you employ your first member of staff.

You must write to you staff to tell them how automatic enrolment applies to them. If they then choose to be put into a pension scheme, you must set this up for them but you do not have to pay into it. When you start to pay your staff over £113 per week, then you must set up a PAYE scheme with HMRC. The Pensions Regulator will then write to you and ask you to complete a declaration of compliance by a specific date. In some cases, directors may be exempt, if they do not have a contract of employment.

Budget Changes that will affect your Payroll from April 2017

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The March 2017 Budget has confirmed the following changes that will affect your payroll from April 2017:

* The personal allowance increases from April 2017 from £11,000 to £11,500 making the standard tax code 1150L.
* The 20% basic tax rate band increases from April 2017 £32,000 to £33,500 per annum.
* The lower earnings limit for National Insurance increases from £112 per week to £113 per week or from £672 per month to £680 per month.
* Statutory sick pay increases from £88.45 to £89.35 per week.
* Statutory Maternity/Paternity/Adoption pay increases from £139.58 to £140.98 per week.
* The National Living Wage for those 25 years old and over increases in April 2017 from £7.20 to £7.50 per hour.
* The National Minimum Wage rates increase in April 2017:21-24 year olds from £6.95 to £7.05;18-20 year olds from £5.55 to £5.60;16-17 year olds from £4.00 to £4.05;apprentice rate from £3.40 to £3.50.
* The Apprenticeship Levy starts April 2017 for businesses whose monthly pay bill is £250,000.
* Tax-Free Childcare will be gradually rolled out from April 2017 for children under 12. If you qualify, the 20% relief of costs of childcare up to a total of £10,000 per child means it will be worth a maximum of £2000 per child.
* The VAT registration threshold increases on 1st April 2017 from £83,000 to £85,000.
* Corporation tax rate reduces from 20% to 19% for the financial year beginning 1st April 2017.

The Apprenticeship Levy

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The Apprenticeship Levy will be introduced in April 2017 to all employers operating in the UK, with a pay bill over £3 million each year, to invest in apprenticeships. Your annual pay bill is all payments to employees that are subject to employer Class 1 secondary National Insurance contributions such as wages, bonuses and commissions.

Apprenticeship Levy is charged at 0.5% of your annual pay bill but you are given a £15,000 annual allowance to offset against this.
For example: If your April 2017 pay bill is £300,000, your levy of 0.5% would be £1500 less £1250 allowance, so you would pay a £250 levy for April 2017.

If you are unsure if you qualify, you must contact HMRC for further advice. As with the employment allowance, this levy is shared across a group of linked companies.

The levy will not affect the way you fund training for apprentices who started an apprenticeship programme before 1 May 2017.  You’ll need to carry on funding training for these apprentices under the terms and conditions that were in place at the time the apprenticeship started.

You will report and pay your levy to HMRC through the payroll process via an RTI EPS submission each month.  Once you have declared the levy to HMRC, you will be able to access funding for apprenticeships through the new apprenticeship service account.  HMRC are working with employers to test and improve the service before inviting all levy-paying employers to register for the service.

 

New auto-enrolment guidance and re-enrolment guidance

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Hundreds of thousands of small employers will need to meet their pension duties in 2017 and so The Pensions Regulator has refreshed and updated their website with new auto-enrolment guidance and re-enrolment guidance to make it simpler for employers to understand their duties. They have made choosing a pension scheme for staff easier with the addition of new information and guidance to help you choose a pension scheme, by listing all schemes available to small employers, prompts to consider tax relief, set-up and ongoing costs, as well as payroll compatibility. It also provides information on how to find an adviser for further help in choosing a scheme should you need it. CLICK HERE for the list of available pension schemes.

The new auto-enrolment guidance also has new essential guidance for larger employers due to begin re-enrolment which covers everything they need to know, from choosing a re-enrolment date to completing the re-declaration of compliance. There are also webinars with details about who needs to be put back in the scheme, and by when.

Employers need to comply with their duties under auto-enrolment – it’s the law. If an employer chooses to ignore their duties they will face enforcement action which can include fines and prosecution. There are more details on The Pension Regulator’s website on what to do if you are in breach of your duties and what enforcement you could expect. Their policy is to make good the contributions by backdating them from when they should have started.

Please visit The Pensions Regulator website for all the information you need.

From April 2018, employers will need to make arrangements to ensure they increase the legal minimum contributions rate to 5%, of which the employer’s minimum increases to 2%. They increase again in April 2019 when the rates go up to 8%, of which the employer’s minimum will be 3%.

Auto-Enrolment Declaration of Compliance

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Auto-enrolment saw it’s fourth anniversary in October, yet more than 900,000 employers have yet to stage and fulfill their employer duties. This means the challenge posed by the initial roll-out is not over. All employers with one or more staff have a legal requirement to complete a declaration of compliance. Even if that one member of staff does not want to be in a pension scheme, they will still need to be automatically enrolled before they can ask to opt out, so you must have a workplace pension in place.

From your given staging date, you have 5 months in which to complete your auto-enrolment declaration of compliance. It is the employer’s legal duty to complete the declaration correctly and on time. If it is not completed on time, then action is likely to be taken by The Pensions Regulator (TPR), which could lead to a fine.

You will need to successfully sign up for a Government Gateway account in order to complete your online declaration, but you can start gathering the information before that by using the declaration checklist. If you have difficulties implementing auto-enrolment or gathering the information to complete your deadline, please contact TPR immediately.

Please visit The Pensions Regulator for employers to check your duties.