We’ve pulled together this handy breakdown to help you understand the changes in PAYE Legislation that affect statutory payments such as maternity (SMP) and paternity (SPP), personal allowance, National Insurance, tax, and the National Minimum Wage, and the impact they will have on your employees.
What will the National Minimum Wage be in 2021?
One of the key changes for 2021 is the extension of the National Living Wage.
From April 2021, the National Living Wage applies to workers aged 23 and over. Previously, it only applied to those aged 25+. This change means millions of younger workers will now benefit from a higher hourly pay rate.
Here’s a breakdown of this year’s rates:
Since its introduction in 2016, a full-time worker earning the National Living Wage has gained approximately £4,030 in annual earnings.
Employers can also choose to pay the Real Living Wage, a voluntary rate calculated by the Living Wage Foundation. This rate better reflects the actual cost of living. The latest Real Living Wage is £9.50 across the UK and £10.85 in London.
What is the personal allowance for 2021/22?
The personal allowance is the amount of income you don’t pay tax on. The tax you owe depends on how much of your income exceeds this allowance and falls within each tax band.
In 2021, the personal allowance increased by £70, bringing it to £12,579. This change means that, starting 6th April 2021, the standard tax code is 1257L. The increase results in just £14 additional income for the year.
Marriage Allowance
If an employee is married or in a civil partnership, they might benefit from Marriage Allowance. If one partner earns less than their personal allowance, they can transfer up to £1,250 of their allowance to their spouse. This could result in £20 to £30 extra per month through a tax code adjustment. Employees can check their eligibility and apply online.
We also strongly advise all employees to register for their Personal Tax Account and to check their eligibility for Tax Relief if they are now working from home.
What is the National Insurance (NI) threshold for 2021/22?
Changes to the national insurance thresholds are also minimal this year. With the Lower Earnings Limit (the amount employees must receive to be eligible for statutory payments) remaining the same.
Here’s an overview of the thresholds for this year, compared to 2020/21:
Directors receiving a salary through payroll will need to consider whether they pay themselves at the Primary Threshold, the Secondary Threshold or whether they want to use their full personal tax allowance. Your accountant will be best placed to advise on this, depending on your individual circumstances.
How much is SMP in 2021?
Changes to statutory pay come into effect from 4th April 2021. As an employer, it is important to ensure you are familiar with the changes and how this may affect your staff.
This means that as of the first Sunday in April, the weekly rate for Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), Statutory Adoption Pay (SAP), Statutory Shared Parental Pay (SSPP) and Statutory Parental Bereavement Pay (SPBP) will increase to £151.97 (or 90% of the employee’s average weekly earnings, whichever is lower).
The increased rate of £151.97 is an increase of £0.77 from 2020’s £151.20 a week, which is considerably less than increases of the previous two years.
How much is SSP in 2021?
Statutory Sick Pay (SSP) is £95.85 a week and can be claimed for up to 28 weeks.
You must pay SSP to an employee who is off work self-isolating and off work for at least 4 days and any of the following statements apply:
- They or someone in their household has coronavirus symptoms or has tested positive.
- They have been notified by the NHS or public health that they have been in contact with someone who has tested positive for coronavirus.
- Someone in their support bubble has tested positive for coronavirus.
- They have been advised by a medical professional to self-isolate before having surgery.
How long has furlough been extended for?
In Rishi Sunak’s Budget announcement he shared the news that the Coronavirus Job Retention Scheme (CJRS), known to most as ‘furlough’ has been extended to September 2021.
Employees will continue to receive 80% of their salary for hours not worked, with employers being expected to contribute 10% in July and 20% in August and September.
You can find out more about this in our Budget Highlights.
Who needs to be aware of these PAYE Legislation changes?
All employers should stay informed about changes affecting their staff. This includes updates to tax codes, statutory payments, and National Insurance thresholds.
Whoever manages your payroll should:
- Understand the latest PAYE legislation
- Ensure your business remains compliant
- Stay updated on upcoming changes.
At Portt & Co, we offer an expert and reliable payroll service. Our goal is to give business owners peace of mind, ensuring that employees are paid accurately and on time.
We stay ahead of PAYE Legislation changes, so you don’t have to. Let us take care of the details while you focus on growing your business.