PAYROLL INFORMATION

Increase in the National Minimum Wage – Effective 1st October 2011

From 1st October the National Minimum Wage rates will increase from:

• £5.93 to £6.08 an hour for employees aged 21 and over
• £4.92 to £4.98 an hour for employees aged 18 to 20
• £3.64 to £3.68 an hour for employees aged 16 to 17

The rate for apprentices increases from £2.50 to £2.60 per hour.
This rate applies for:

• Apprentices under 19
• Apprentices 19 and over, but in the first year of their apprenticeship.

Please note tips, gratuities, and cover charges paid to employees via the payroll should not be included in the calculation for the minimum wage.

Companies who do not pay the minimum wage could incur a penalty from HMRC ranging from £100.00 to £5,000.00.

Please note:

• Pay Check will not be responsible for automatically updating any employee rates on 1.10.11 or anytime during the year when employees turn 16, 18 or 21 years old.
• It is our client’s responsibility to inform us of any revised rates of pay due to the above changes.
• Any rate change should be sent via email confirming the employee name, new hourly rate and the effective date.

For further information please visit the below:

www.direct.gov.uk
www.hmrc.gov.uk

Thank you

Tracy Anderson
Client Services Manager

September 2011

From 6th April 2011, payments that are made after an employee has left and a P45 has already been issued, will be subject to 0T week1/month tax code.

The 0T Y tax code will deduct tax at the appropriate tax rates of 20%, 40% and 50% depending on the total of the final payment.

This will avoid employees underpaying their tax on payments after leaving.

For the 2010/11 tax year payments after leaving were calculated at BR which is a straight 20% deduction.

Tax Thresholds 2011/2012

Tax Band	Weekly Paid	Monthly Paid
Basic Rate: 20%	£0 - £673.07	£0 - £2,916.67
Higher Rate: 40%	£673.08 - £2,884.62	£2,916.68 - £12,500.00
Additional Rate: 50%	over £2,884.62	over £12,500.00

The “annual allowance” is the maximum amount of pension saving an individual can have each year that attracts tax relief. An individual can save as much as they like into a pension but if the pension saving is more than the annual allowance the individual incurs a tax charge. The annual allowance for the current year is £255,000 but this reduces to £50,000 for 2011/12.

If the pension saving is more than £50,000 a tax charge will arise. However, if the individual’s pension savings were less than £50,000 for earlier years they can carry forward unused allowances from those years and so reduce any tax charge.

The individual is responsible for checking how much pension saving they have made and whether they are due to pay the annual allowance tax charge. The tax charge is collected through their Self Assessment Tax Return – so this is a personal tax matter.

For a nominal fee of £15.00 Pay Check can register a PAYE scheme with the revenue on your behalf. 

We will require the following information:

1. Company Name
2. Company Registration No if a Limited Company,
3. Exact Date of Incorporation if a Limited Company,
4. Brief description of the business
5. Registered office address
6. Trading address
7. Number of directors or partners
8. Names and home addresses of directors/partners
9. NI Numbers of directors

Pay Check will forward you the PAYE and tax district details and yellow payment booklet once we receive them from the Revenue.
See the BACS Section for PAYE via BACS.
Pay Check does not complete monthly slips from the yellow payment book. 

We expect to receive ONE email a month informing us of all the changes to your payroll.

We need to receive all changes via email and post 7 working days before your pay date.

The email subject box should be filled in first with your 'Company Name' followed by 'Payroll Changes' and the month (see example below ).  This will assist us to file your changes together.

Subject:     ABC Limited Payroll Changes January 2012 If you also send us information through the post please could you send us one package per month.  All information sent in the post must be clearly identified with your 'Company Name'.

Pay Check is delighted to produce a Master Input Sheet for you to record your changes.  If this is of interest please request one via email.

Useful Tips

• Give an instruction only once.  If you detail on your spreadsheet that Mary has received a commission payment of £75.00 and detail the same instruction on a covering email, Mary is likely to receive £150.00.
• Send only one instruction per pay period informing us of the changes.
• Write clearly with concise instructions, please only detail information that is relevant for processing the payroll.
• Ensure any information that is sent/faxed or emailed to Pay Check is clearly identified to your company.

 download page

1. Full name, address, date of birth, start date and salary
2. NI number and completed P46 or valid P45 (P46 PDF attached).  Please ensure your company name is completed in the Employers name box on page 2 of the form P46
3. Department and Division
4. Other permanent additions and deductions (if applicable) and details if they are taxable or non taxable
5. Bank details (for BACS clients only).

It is not Pay Check’s responsibility to check the eligibility of an employee to work in the UK.

The Revenue will no longer accept temporary NI numbers.  If an employee does not have a National Insurance number:

• keep a record of their full name, address, gender and date of birth
• tell them to contact their nearest Jobcentre Plus office (Jobcentre Plus is part of the Department for Works & Pensions).

The Jobcentre Plus office will give the employee a date for a face-to-face interview.  This interview is to check the employee’s identity before they are given an NI number.  They will tell the employee which documents they need to take with them to the interview.

After the interview, the employee will be given a tear-off portion from the application form CA5400.  As the employer you should keep a copy of the CA5400 as evidence that an NI number as been applied for.  After making their checks, the Jobcentre Plus office will write to the employee to inform them of their NI number and will send an NI number card some weeks later. 

 download page

 

If you are a British citizen, an NI number will automatically be issued to you before your 16th birthday. However, if you have moved to the UK you will need to apply for an NI number.

You need to apply for an NI number if:

• You are starting work/looking for work;
• You are setting up as self-employed;
• You want to make voluntary NI contributions and would benefit from them.

You will also need one if you are claiming benefits. If this is the case, you can apply for one via the claims process.

To apply for an NI number, call 0845 600 0643 (Mon-Fri, 8am-6pm). Jobcentre Plus will check if you need an NI number or if you already have an NI number.

They will then arrange an Evidence of Identity interview. This will involve checking who you are, your eligibility to work in the UK, why you want an NI number and your background and circumstances. You will need to bring along documents to prove your identity. At the end of the interview, you will be asked to sign an NI number form.

Following the interview, you will be contacted and informed as to whether you have been successful or not.

If you have lost your NI number:

Look at your P60, payslip, annual tax return or any other official correspondence from the Revenue. Your NI number should be present on any of this documents.

Remember, your NI number always remains the same throughout your life.

If you cannot find it, contact your local jobcentre or the HMRC NIC office and they will be able to help you on what to do next or your employer can send an NI Number tracing form to HMRC.

If you have lost your NI card:

Inform your Jobcentre immediately. They will tell you to fill out an application form for a replacement. You will only be allowed ONE replacement card.

In order to apply for NI deferment you must be either:

• Paying NIC Class 1 to two or more employers or;
• Be self-employed and paying NIC Class 2 and/or NIC Class 4.

If this is the case, you can apply for a deferment to prevent overpaying NI. A deferment can only be issued one tax year at a time. If the deferment is granted, you will still have to pay NIC Class 1 at 1% on all earnings above the earnings threshold on all deferred employments.

To apply for a NI deferment you will need to fill out a different form depending on whether you are deferring NIC Class 1 or Class 2/Class 4. Send the completed form to the HM Revenue and Customs Deferment Services as soon as possible before the start of the tax year you want to defer payments on.

If you do not make a deferment and as a result make an overpayment (in excess of the annual maximum), you can apply for a refund. Write to:

HM Revenue & Customs
National Insurance Contributions Office
Refunds Group
Longbenton
Newcastle Upon Tyne
NE98 1ZZ

Remember to include your National Insurance number and details of your overpayment.

For forms and further guidance, please click the link below:
http://www.hmrc.gov.uk/nic/deferment.htm

In order to promote a healthier lifestyle and help reduce environmental pollution, the

Cycle to Work scheme was introduced. An employer can benefit from annual tax exemption, in accordance with the Finance Act (1999), as they can loan bikes and safety equipment to employees as a tax-free benefit.

Who is eligible?
Any company, big or small, in public, private or voluntary sectors, are eligible for the scheme. The broader the participation throughout the company, the more a company can benefit. To qualify for tax exemption, bikes and safety equipment must be available to employees generally and not be limited to directors or those working in certain departments for example.

What equipment is included under the scheme?
The tax exemption defines a bike as: ‘a bicycle, a tricycle, or a cycle having four or more wheels, not being in any case a motor vehicle’ (192[1] of Road Traffic Act 1988 [c.52])

The safety equipment includes:

• Helmets (under the European Standard EN 1078)
• Bells and bulb horns
• Lights, including dynamo packs
• Mirrors & mudguards
• Cycle clips & dress guards
• Panniers, luggage carriers & straps
• Locks & chains
• Pumps, puncture repair kits, cycle tool kits & tyre sealant
• Reflective clothing, white front reflectors & spoke reflectors

It is an employer’s choice as to what safety equipment is included, but it is best to confirm with the tax inspector. There is no limit on the total value of safety equipment, including the bike.

It is possible to loan two bikes per employee e.g. if the employee requires a bike for either end of their train journey. In order to encourage participation in the scheme, consider providing facilities at work such as cycle racks, lockers and showers.

Scope of Tax Exemption
To qualify for tax exemption, the scheme must meet certain conditions:

• The ownership of the bike cannot be transferred to the employee during the loan period.
• The bike has to be used mainly for qualifying journeys i.e. to get to and from work, as part of a work-related journey or between workplaces. (‘Mainly’ = more than 50% of the bike’s usage is for work-related journeys.)
• If the bike’s usage is below the 50% mentioned above, the company can lose the benefit of tax exemption. In this case, the employer will need to report it as a benefit in kind on a P11D and account for Class A NIC. The employee is then liable for the tax on benefit in kind.

Setting up a scheme
To take advantage of tax exemption and Class A NIC exemption, an employer can buy a bike and relevant safety equipment, reclaim VAT, use capital allowances and loan the bike and its equipment to an employee for qualifying journeys to work. This way, the employee’s salary arrangements are unaffected.

However, if an employer wants to recover the costs of the bike etc, this can be done through salary sacrifice.

Can an employee keep the bike at the end of the loan period?
An employee has no automatic right to keep the bike, unless it is otherwise stated in the original agreement between the employer and the employee.

However, an employer can give the option for the employee to purchase the bike and equipment. Typically, the price is lower than the original value, but to prevent taxable benefit in kind because of the change in ownership, the price must be the fair market value.

Alternatively, an employer can let the employee use the equipment and bike after the loan period ends, as long as the conditions continue to be met. In this case, the ownership of the bike and equipment is not transferred.

Mileage Allowances
An employee who is considering joining the Cycle To Work scheme, but wants to use their own bike, can claim 20p per mile, tax free, for business miles, as opposed to having a bike loaned to them.

An employee who has had a bike loaned to them CANNOT claim mileage allowances.

For more information click here
or
see the following PDF document

Childcare Vouchers Change

From the 6th April 2011, new joiners to the Childcare Voucher scheme will no longer automatically receive up to £55 per week exempt from tax and NI.

Employees paying higher (40%) or additional (50%) rates of tax will only receive the same tax savings as those paying basic (20%) rate of tax.

This does not affect existing employees, who had already joined the Childcare Voucher scheme on or before the 5th April 2011. Their tax exemption will stay the same regardless of their tax band.

To find out who is affected by this change an annual estimated earnings assessment will need to be done. The Employer needs to carry this out when an employee first requests to join the Childcare Voucher scheme on or after the 6th April 2011 and again on an annual basis (every April) to ensure the correct value of Childcare Vouchers are being applied.

The estimated earnings assessment should include the below, payable in the relevant tax year:

• Contractual wages
• Taxable benefits in kind (benefits made available to the employee)
• Guaranteed bonuses
• London Weighting or other regional allowances
• Shift Allowances

Items not to be included are:

• Potential bonuses
• Overtime payments
• Benefits that are exempt from tax such as pension contributions, GAYE, SAYE and cycle to work scheme

Earnings should be post any salary sacrifice deductions. You should also use their relevant tax code.

This assessment will fix the level of Childcare Vouchers. This will stay in place until the next assessment is due which will be the following April.

An Earnings Assessment is only carried out once in a tax year.

For more information please go to http://www.hmrc.gov.uk/paye/exb/a-z/c/childcare.htm

The below table shows the new maximum value of Childcare Vouchers exempt from tax depending on what tax band the employees comes under:

Tax Payer	Basic (20%)	Higher (40%)	Additional (50%)
WEEKLY	£55	£28	£22
MONTHLY	£243	£124	£97
ANNUAL	£2915	£1484	£1166

How do you know if a new joiner on or after 6th April 2011 is affected and what value they can receive?

We have created a simple calculator which will quickly help you identify what tax band your employee comes under and what tax exempt Childcare Vouchers they are entitled to for that current tax year.
Click Here to download it in Excel format.

What are childcare vouchers?

Childcare vouchers are an employee benefit and are part of the government’s work-life balance scheme, supported by HM Revenue & Customs. The vouchers pay for a variety of childcare, such as nannies, au pairs, crèches and nurseries, out of school clubs, holiday clubs, activity clubs and qualifying childcare offered by schools.

Who is eligible for the vouchers?

The vouchers are available for all eligible working parents, providing that the employer registers with a childcare voucher scheme. The parents can only claim vouchers for a child until the 1st September following the child’s 15th birthday or until 1st September following the child’s 16th birthday if the child is disabled.

Who pays for them?

There are two ways in which childcare vouchers are paid for. An employer may offer the vouchers on top of an employee’s salary. This will be exempt from tax and National Insurance as long as certain conditions are met.

The other way, in which they are paid for, is that an employee will take a reduction in pay, known as a salary sacrifice. The maximum monthly salary sacrifice is £243 which will be determined by their tax band. This can affect any tax credits and/or benefits that an employee may receive. However, if the employee is on SMP, they cannot receive vouchers through salary sacrifice.

How are childcare vouchers issued?

The vouchers are issued by a childcare voucher provider. A childcare voucher provider is usually who a company sets up their childcare scheme with. The vouchers can be either issued in paper form or electronically.

The vouchers do not have to be used immediately. Many working parents save them and use them to pay for childcare during the holidays when it becomes more expensive.

The vouchers cannot be backdated and therefore, only a month’s worth of vouchers can be processed each month.

What information does the employer need?

In order to meet tax and NI exemptions, the following information may be needed:

• Date of Birth of child;
• If the child is disabled;
• The relationship to the child if the claim is not made by the parent;
• Name of childcare provider plus their registration and/or approval number;
• The date of which their registration expires.

For more information: http://www.hmrc.gov.uk/childcare/ and
http://www.direct.gov.uk/en/Parents/Childcare/DG_4016029

There are different procedures depending whether you are claiming for the current tax year or previous tax years.

Current Tax Year
Firstly, you need to explain to your employer’s tax office why you think that you qualify for a tax refund, e.g. you are a student or you no longer work in the UK. They may ask for relevant documents to be sent to them. If the refund is approved, you may get a new tax code and the refund will be included with your wages.

Previous Tax Years
Write to your tax office, explaining why you think you qualify for a tax refund and include documents relevant to your earnings in that tax year such as your P60 or P45. It is also useful to have your employer’s PAYE reference and your National Insurance number ready when you contact the tax office.

The tax office will look into your query, work out how much you are owed and refund you via post.

IMPORTANT:
You have until 31 January, FIVE YEARS after the end of the tax year in which the overpayment was made, e.g. A claim for tax year 2004/2005, in which the tax year ended on 5th April 2005, needs to be claimed by 31st January 2011.

Useful Tips:

• Always take the name of the person you speak to.
• Keep chasing the tax office for your claim.

http://www.hmrc.gov.uk/incometax/overpaid-thro-job.htm#2

If your tax code is on a week1/month1 basis it means that when your pay is calculated, any previous pay you have received and any tax you have paid are not taken into consideration.

Normally, tax is calculated on a "Cumulative basis" which means that each month/week you receive an extra month/weeks worth of freepay and 20% tax bracket allowances and these are added to all all the previous allowances you have received for each pay run since the beginning of the tax year on 6th April. All your pay is added together from that date too and the tax due is then calculated. Then the tax that you have already paid is deducted and what is outstanding is then taken from the current payroll. This means that the tax is always correcting itself to make sure you don't over or under pay tax by the end of the financial year.

This does not happen on a week1/month1 basis. This could be for many reasons, one being that you have underpaid tax earlier in the financial year and HMRC have increased you code to allow for this. The week1/month1 basis will prevent you paying back the underpayment in one lump and allow you to spread it over the remaining payrolls for that financial year.

STATUTORY REDUNDANCY PAY

Statutory Redundancy pay increases from 1st February 2012 from £400.00 per week to £430.00 per week. If an employee's weekly salary is lower than the statutory amount, then the lower amount is payable. Statutory Redundancy pay is tax free up to £30,000. Redundancy pay over £30,000 is subject to tax at basic rate currently 20% and no Employees or Employers NIC is payable. To qualify an employee must have been continuously employed for a minimum of two complete years.

The table below shows how many weeks redundancy an employee would be entitled to based on age and length of employment. If the employees earnings vary each week, an average of the last 12-week period leading up to the redundancy is used. Statutory Redundancy is capped at 20 years service.

STATUTORY REDUNDANCY TABLE

17* - The table starts at age 17, as it is possible for a 17 year old to have 2 years service. Compulsory school leaving age can be 15 3/4 or 15 4/5 where a child is 16 before 1st September.

61* - The table stops at age 61 because for employees aged 61 and over, the payment remains the same.

The number in the grid indicates the number of weeks Statutory Redundancy due, based on age and length of service i.e. if you were 44 and worked for 5 complete years you would be due 6.5 weeks Statutory Redundancy 6.5 x £430.00 = £2,795.

	Service (Years)
Age	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20
17*	1
18	1	1½
19	1	1½	2
20	1	1½	2	2½	-
21	1	1½	2	2½	3	-
22	1	1½	2	2½	3	3½	-
23	1½	2	2½	3	3½	4	4½	-
24	2	2½	3	3½	4	4½	5	5½	-
25	2	3	3½	4	4½	5	5½	6	6½	-
26	2	3	4	4½	5	5½	6	6½	7	7½	-
27	2	3	4	5	5½	6	6½	7	7½	8	8½	-
28	2	3	4	5	6	6½	7	7½	8	8½	9	9½	-
29	2	3	4	5	6	7	7½	8	8½	9	9½	10	10½	-
30	2	3	4	5	6	7	8	8½	9	9½	10	10½	11	11½	-
31	2	3	4	5	6	7	8	9	9½	10	10½	11	11½	12	12½	-
32	2	3	4	5	6	7	8	9	10	10½	11	11½	12	12½	13	13½	-
33	2	3	4	5	6	7	8	9	10	11	11½	12	12½	13	13½	14	14½	-
34	2	3	4	5	6	7	8	9	10	11	12	12½	13	13½	14	14½	15	15½	-
35	2	3	4	5	6	7	8	9	10	11	12	13	13½	14	14½	15	15½	16	16½
36	2	3	4	5	6	7	8	9	10	11	12	13	14	14½	15	15½	16	16½	17
37	2	3	4	5	6	7	8	9	10	11	12	13	14	15	15½	16	16½	17	17½
38	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	16½	17	17½	18
39	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	17½	18	18½
40	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	18½	19
	Service (Years)
Age	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20
41	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	19½
42	2½	3½	4½	5½	6½	7½	8½	9½	10½	11½	12½	13½	14½	15½	16½	17½	18½	19½	20½
43	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20	21
44	3	4½	5½	6½	7½	8½	9½	10½	11½	12½	13½	14½	15½	16½	17½	18½	19½	20½	21½
45	3	4½	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20	21	22
46	3	4½	6	7½	8½	9½	10½	11½	12½	13½	14½	15½	16½	17½	18½	19½	20½	21½	22½
47	3	4½	6	7½	9	10	11	12	13	14	15	16	17	18	19	20	21	22	23
48	3	4½	6	7½	9	10½	11½	12½	13½	14½	15½	16½	17½	18½	19½	20½	21½	22½	23½
49	3	4½	6	7½	9	10½	12	13	14	15	16	17	18	19	20	21	22	23	24
50	3	4½	6	7½	9	10½	12	13½	14½	15½	16½	17½	18½	19½	20½	21½	22½	23½	24½
51	3	4½	6	7½	9	10½	12	13½	15	16	17	18	19	20	21	22	23	24	25
52	3	4½	6	7½	9	10½	12	13½	15	16½	17½	18½	19½	20½	21½	22½	23½	24½	25½
53	3	4½	6	7½	9	10½	12	13½	15	16½	18	19	20	21	22	23	24	25	26
54	3	4½	6	7½	9	10½	12	13½	15	16½	18	19½	20½	21½	22½	23½	24½	25½	26½
55	3	4½	6	7½	9	10½	12	13½	15	16½	18	19½	21	22	23	24	25	26	27
56	3	4½	6	7½	9	10½	12	13½	15	16½	18	19½	21	22½	23½	24½	25½	26½	27½
57	3	4½	6	7½	9	10½	12	13½	15	16½	18	19½	21	22½	24	25	26	27	28
58	3	4½	6	7½	9	10½	12	13½	15	16½	18	19½	21	22½	24	25½	26½	27½	28½
59	3	4½	6	7½	9	10½	12	13½	15	16½	18	19½	21	22½	24	25½	27	28	29
60	3	4½	6	7½	9	10½	12	13½	15	16½	18	19½	21	22½	24	25½	27	28½	29½
61+	3	4½	6	7½	9	10½	12	13½	15	16½	18	19½	21	22½	24	25½	27	28½	30

Useful websites:	www.direct.gov.uk
	www.businesslink.gov.uk
	www.berr.gov.uk
Direct Gov Redundancy Guide
Direct Gov Redundancy Calculator