Payroll changes 6th April 2020 – new rates and allowances

New tax rates and thresholds come into effect from 6th April 2020. Below, we’ve listed all of the employee pay related rules being updated. It is also worth noting that the government has launched a new campaign to remind employees of their holiday pay entitlements. Regardless of whether your employee is a part-timer, seasonal worker or works irregular hours, they have a legal entitlement to be paid time off for every hour worked. More information can be found here.

New Rates and Thresholds for the Tax Year 2020-21
The employee personal allowance for the tax year 20-21 is staying the same – £12,500 per annum.

The emergency tax codes from 6 April 2020 are:

  • 1250L w1/m1
  • 1250L x

English and Northern Irish tax rates
20% on annual earnings above the £12,500 allowance and up to £37,500

40% on annual earnings from £37,501 to £150,000

45% on annual earnings above £150,000

New rates for Scotland and Wales can be found here

Class 1 National Insurance thresholds 2020 to 2021
Lower earnings limit £120 per week
£520 per month
£6,240 per year
Primary threshold £183 per week
£792 per month
£9,500 per year
Secondary threshold £169 per week
£732 per month
£8,788 per year
Upper secondary threshold (under 21) £962 per week
£4,167 per month
£50,000 per year
Apprentice upper secondary threshold (apprentice under 25) £962 per week
£4,167 per month
£50,000 per year
Upper earnings limit £962 per week
£4,167 per month
£50,000 per year

Termination Payments
As of 6 April 2020, Class 1A National Insurance contributions are due on the amount of termination pay awarded to workers which exceed £30,000.

National Minimum Wage
The NMW is being increased by 51p from 6 April.

Category of worker Hourly rate
Aged 25 and above (national living wage rate) £8.72
Aged 21 to 24 inclusive £8.20
Aged 18 to 20 inclusive £6.45
Aged under 18 (but above compulsory school leaving age) £4.55
Apprentices aged under 19 £4.15
Apprentices aged 19 and over, but in the first year of their apprenticeship £4.15

National Living Wage
The NLW rates were announced back in November 2019. Accredited Employers were advised to implement these rates as soon as possible and within 6 months. Therefore, all employees should receive the new rate by 1st May.

The current rate for London has increased by 25p an hour to £10.75 and the rate for rest of the UK has increased by 30p an hour to £9.30 an hour.

All employees should receive the new rate by 1st May

Statutory Payments
Statutory maternity, paternity, adoption and shared parental pay will increase from £148.68 to £151.20.   Statutory sick pay will increase from £94.25 to £95.85.

The average earnings a worker has to earn to receive these payments will also increase from £118 to £120 per week.

New starter checklist
HMRC has released an updated and improved starter checklist form (also called P46). The new version can be find here.

Student Loans
The new thresholds for Plan 1 will rise to £19,390 and Plan 2 will rise to £26,575.

The current threshold for Postgraduate Loan will remain the same at £21,000.

Employment Contracts
From 6 April 2020 all new starters must receive their contract of employment on or before their first day. This right has been extended to workers – not just employees.

Principal statement must be in writing – irrespective of how long the work will last. The list of matters has been also extended. Employers who fail to fulfil the regulation can face an Employment Tribunal.

Parental Bereavement Leave and Pay
Under the ER act 1996, employees currently have the right to take “reasonable” time off which is currently not paid. However, the new Parental Bereavement Leave and Pay Regulations come into force on 6 April 2020 – known as “Jack’s Law”.

Eligible parents who suffer the loss of a child will be entitled to 2 weeks of statutory leave. Under the new regulations, employers will not need to request a copy of the death certificate.

Small employers will be able to recover all statutory parental bereavement pay, while larger companies will be able to reclaim 92% via EPS submissions.

Pensions and Automatic Enrolment (AE)
Pensions Minister, Guy Opperman, confirmed that the AE earnings trigger will remain the same, at £10,000.

The Annual earnings thresholds have been proposed as:

Lower level of qualifying earnings £6,240
Earnings trigger for AE £10,000
Upper level of qualifying earnings £50,000

Holiday Pay for workers without fixed hours or pay
From 6 April 2020 the reference period for holiday pay calculation is increasing from last 12 weeks to 52.

If an employee has not been employed by you for long enough, you should use however many completed weeks they have for the calculation.

If an employee takes holiday before the first completed week, then you should pay the worker a fair amount which represents their pay. HMRC defined fair as:

  • The worker’s pay for the job
  • The pay already received by the worker (if any)
  • What other workers doing a comparable role for the employer (or for other employers) are paid

How far I should look?
Limitation has been set to prevent employers having to look back more than 2 years to reach 52 weeks of pay data. “Any weeks that are before the 104 complete weeks prior to the first day of the worker’s holiday are not included. In this case the reference period is shortened to however many weeks are available in this 104-week period”

You can download the full factsheet here

As ever, if you need any help with managing these changes or have any further questions, please don’t hesitate to get in touch.



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