18 Sep Changes in Payroll – Budget Autumn 2015
Budget 2015 – Payroll
How will the recent budget proposals affect you, your staff and your payroll function?
From April 2016 the government will introduce a new National Living Wage (NLW) for workers aged 25 and above, by introducing a premium on top of the National Minimum Wage (NMW). The NLW will be set at £7.20 an hour.
The NLW will be paid to workers aged 25 and above. Initially, it will be set at £7.20 an hour, with a target of it reaching more than £9 an hour by 2020. Part-time and full-time workers will get it. This is a top up for those aged 25 and over, the National Minimum Wage will stay in place for those under 25 with different levels of NMW for under 25, 18 – 20 year olds, 16 – 17 year olds and Apprentices.
What will this mean for you?
Increased administration and HR costs? Not only must you comply with the NMW but also the NLW from April 2016.
In October 2015 the NMW will increase as follows:
- 21 + £6.50 increasing to £6.70
- 18 to 20-year-olds currently £5.13 will increase to £5.30 in October
- 16 – 17 year olds currently £3.79 increasing to £3.87
- Apprentices currently £2.73 increasing to £3.30 per hour.
The NLW comes in to affect in April 2016 set at £7.20 so will add another tier to the minimum wage scale.
Its not all bad news (!)
From April 2016, the government will increase the NIC Employment Allowance from £2,000 to £3,000 a year. The increase will mean that businesses will be able to employ four workers full time on the new National Living Wage (NLW) without paying any NIC.
Sole Directors beware: An important note for directors who are sole employees and claiming the allowance – this will not be possible after April 2016. This is to help ensure that the NIC Employment Allowance is focussed on businesses and charities that support employment.
The government have also removed the dividend tax credit meaning directors may need to look at other options for profit extraction. From April 2016, there will be a new dividend tax allowance of £5,000 with a new dividend tax rate of 7.5% tax rate for basic rate tax payers, 32.5% for higher rate tax payers and 38.1% for additional rate tax payers.
Increased financial pressure on SMEs
Many small businesses will soon be reaching their staging dates for Auto Enrolment. With a tiered scale of contributions increasing to 8% by September 2018 (3% employer 5% employee) there will be increased financial pressure on small businesses with regard to wages and payroll admin in the next few years.
So in the coming year as an owner managed business you will need to consider the following with regard to HR and payroll admin costs:
Directors profit extraction methods before April 2016 dividend taxation changes
Small Businesses Auto Enrolment Staging dates – Contributions and administration costs
National Minimum wage increases – increase in payroll admin and salaries
From Jan 2016
Increased costs on wage increases and admin
Auto enrolment – set up costs and monthly contributions
National Living wage for those over 25 – increase in payroll admin and salaries
Sole Directors claiming Employment Allowance
How Can We Help
EA Assist offers outsourced payroll and bookkeeping service. We will ensure you are:
compliant with all minimum wage levels,
ensure all Real Time Information (RTI) submissions to HMRC are completed,
ensure you receive the government initiatives where applicable, such as the Employment Allowance
and be on hand to assist with the initial set up and payroll administration for Auto Enrolment or any pension scheme you may currently run.
Its really easy – contact us now and we will get you and your payroll service set up in no time at all.