The latest HMRC Bulletin has been released – December 2021
If you haven’t read previous HMRC Bulletins, they are well worth a read as they help keep you up to date with the latest payroll news and you don’t need to work within payroll to find them useful. The bulletins are released bi-monthly, and the previous 2021 releases can be accessed here.
Below are some of the subjects discussed in the December Bulletin:
In partnership with Modulr we can now make payments to employees on your behalf. Our new system does away with the old bank files and three working days for payments to be made. Instead, payments go directly from our software and payments can be scheduled for any time you like, whether that be instantly, or on any other day.
The Modulr system is secure, using the Authy app to provide access to the Modulr account, with authorisations required for payments to be made. The power is in your hands as the client, but we will do all the work in the background, allowing you to get on with other business matters.
Not only can we pay employees on your behalf, but we can also make the PAYE tax payments to HMRC each period. You no longer will need to worry about deadlines and using the correct references to ensure HMRC assign the payment to the correct account and period, we will do all this for you.
How it works?
We will run your payroll as normal
We initiate the payment process directly within the platform
You approve pre-populated batches of payments in just a few clicks
Your payments are sent to your employees on your pre-set date
Why use this?
Save time and maximise efficiency: Let us handle your payments while you grow your business.
Fast Payment Processing: Make payroll and invoice payments in just 90 seconds with Faster Payments.
Secure and Compliant Network: Process payments through a highly secure network. Modulr is authorised and regulated by the FCA.
This new service is open to all existing and new clients. Please get in touch if you would like to know more!
Progress is an important part of any business, and we are always striving to provide the very best service. Because of this we are now utilising a cloud service called BrightPay Connect.
We will provide you with your own employer dashboard which you access via an app or online. From here you will be able to access the many benefits using Connect provides.
Employer benefits:
Access to numerous payroll reports whenever you need them
Provide your accountant direct access to your dashboard enabling them to download any reports they require
Access to previous payrolls
GDPR compliant
Employees will have their own personal dashboard where they will receive payslips directly, saving you time handing them out each pay period
Employees can access previous payslips, saving you time when requests come in for previous period payslips, eg for mortgage applications
P60s will be made available directly to employees through their dashboards
Employees can update their personal information which will feed directly through it us
Annual leave calendar where the employees can request annual leave, this will go directly to you to authorise. If authorised the calendar will be updated. This then gives you a company wide view for who is on holiday and annual leave remaining for each employee
Employee benefits:
Online access to personal dashboard via the app or online
Payslips made directly available via their dashboard along with previous payslips
Update personal information
Annual leave requests
Remaining annual leave balance
We will still be providing clients with the payroll output each month via an email so you have a copy to hand and we will be just as available to assist with any questions.
For existing clients, the process to set up the employer and employee dashboards is a quick and simple process which requires very little input from your side. We will also be on hand to assist with any questions you or your employees have.
Please get in touch if you have any questions regarding the cloud service or if you require a free quote for payroll services.
The scheme which enabled employers to claim back up to 2 weeks SSP if the employee was off for COVID related reasons is due to end on the 30th September 2021.
Employers will be able to make claims for periods prior to the scheme closing up to 31st December 2021.
Following on from the speculation over the last few days the government has announced a 1.25% percentage point rise in National Insurance from 22/23.
There will also be a 1.25% tax increase on share dividends.
From 23/24 tax year the National Insurance increase will become a separate levy and the National Insurance rates will revert to the current level.
Currently employees National Insurance is 12% and employers is 13.8%. To help explain how National Insurance is calculated based on the current rates we have two separate blog posts,
There have been many stories in the press over the past few days regarding the potential increase to National Insurance to help fund social care in the UK. The potential increase is reported to be 1% and there are calls from within the Conservatives to increase this to 2%.
For information regarding the current rules on employees National Insurance and how this is calculated please check out our blog post.
The scheme has previously been extended several times, but so far there is no news to suggest this will happen again so it’s important to prepare for the closure of the scheme.
For September the amount the employer can claim back is 60% up to £1,875, though the employer must at a minimum top the employees pay up to 80%.
Following on from part 1 where we looked at employees National Insurance, this week we are going to explain what employers National Insurance is and how it’s calculated. We are specifically going to be looking at employers Class 1 National Insurance.
What is employers Class 1 National Insurance?
Employers NI is a direct cost to the business and an important part in understanding the costs associated with having employees.
Employers pay Class 1 National Insurance based on their employees’ earnings and NI category letter. Employers NI is calculated on a pay-by-pay period basis unless the employee is a director in which case there are two calculation methods which will be discussed later in this post.
What is the employer Class 1 National Insurance Rate?
The employers NI rate for 2021/22 is 13.8%.
Is National Insurance calculated on all earnings?
Employers NI is nearly always due if you have employees, though there are some exceptions. If an employee has the category letter H, M or Z and earns below £4,189/mth no employers NI is due.
The table below from HMRC shows the NI rates based on category letter and earnings.
Category letter
£120 to £170 (£520 to £737 a month)
£170.01 to £967 (737.01 to £4,189 a month)
Over £967 a week (£4,189 a month)
A
0%
13.8%
13.8%
B
0%
13.8%
13.8%
C
0%
13.8%
13.8%
H
0%
0%
13.8%
J
0%
13.8%
13.8%
M
0%
0%
13.8%
Z
0%
0%
13.8%
Source: HMRC
Employers NI isn’t payable until an employee earns above the secondary threshold (£737/mth). The table below shows the relevant employer NI thresholds.
2021/22 monthly thresholds
Secondary Threshold (ST)
£737
Upper Secondary Threshold (UST)
£4,189
Apprentice Upper Secondary Threshold (AUST)
£4,189
How to calculate employers National Insurance
Now we’ve had a chance to explain what employers NI is, it’s time to look at some examples:
Example 1
The employee is paid gross £1,500/mth,
1,500 – 737 = 763
13.8% of 763 = £105.29 employers NI due
Example 2
The employee is paid gross £3,000/mth,
3,000 – 737 = 2,263
13.8% of 2,263 = £312.29 employers NI due
Example 3
The employee is paid gross £600/mth,
As the employee is earning below the Secondary Threshold (£737/mth) no employers NI is due.
Example 4
The employee is paid £1,000/mth and is aged 18,
Even though the employee is earning over the Secondary Threshold they are under 21 which means no employers NI is payable. The employee would have the NI category letter M in this instance.
NI Employment Allowance
Companies which are eligible to claim the NI Employment Allowance can reduce the annual employers Class 1 National Insurance by up to £4,000.
If you are claiming the NI Employment Allowance you will still see the employers NI on the P32, though it should also show the amount of employers NI being waived.
If you don’t claim the full £4,000 within the tax year you can’t carry over the remaining amount to future tax years.
Eligibility criteria:
You need to be a business or charity
You employers Class 1 NI liabilities for the previous tax year was under £100,000
The company needs to be within the de minimis state aid threshold if applicable
You can’t claim if the only person earning above the Class 1 NI secondary threshold is a director
If you are a connected company, there are numerous eligibility criteria which can be found here.
You can claim Employment Allowance for the previous 4 tax years going back to 2017/18. You need to be mindful that the eligibility criteria and total claimable amounts can be different in previous tax years.
Employers NI for directors
There are two methods of calculation for directors:
Standard, National Insurance is calculated on a year-to-date basis. Employers NI isn’t calculated until the earnings breach the annual Secondary Threshold (£8,840).
Alternative, National Insurance is calculated on the pay for that period. When the last payroll of the tax year is processed there needs to be a re-calculation of NI for the entire tax year and any underpayment needs to be made along with the month 12 taxes.
Summary
Understanding employers Class 1 National Insurance and how it’s calculated will not only help you further understand the reports produced each pay period but also help caluclate the cost of employment.
