If you’re a regular reader of this blog, you will know that there’s a number of PAYE changes coming up in 2022. HMRC covers them in some detail in the December 2021 edition of its Employer Bulletin, but we felt it would be helpful to give you a summary here.
Of course, if you currently use our payroll service, we will ensure that your payroll is processed correctly under the new rules. However, it’s worth emphasising that you will need to provide us with extra information in some cases. For example, we’ll need to know if you have hired a former member of the armed forces during their first year in civilian employment. If you have, you are eligible for the National Insurance holiday outlined below.
1. National Insurance increase
From April 2022, National Insurance contributions will increase by 1.25% for both employers and employees, making a net increase of 2.5%. This additional levy is to generate extra funding for the NHS.
HMRC is asking employers and payroll software companies to include a message on payslips between 6th April 2022 and 5th April 2023. This should read: ‘1.25% uplift in NICs funds NHS, health & social care’.
From April 2023, the additional levy will be separated from NI contributions. Instead, it should appear on payslips as the ‘Health and Social Care Levy’. From this point, it will also be applied to the earnings of people over state pension age. NI contributions will revert back to current levels.
2. NI holiday for veterans
From 6th April 2021, a new National Insurance holiday came into force. In a nutshell, if you employ an armed forces veteran during their first year in civilian employment, you are eligible for a zero-rate of secondary NI contributions for up to 12 months.
Currently, you have to pay NI contributions as normal until April 2022. Then you can claim back the National Insurance retrospectively. You do this via a revised Full Payment Submission showing the new NI category letter ‘V’.
If your payroll software does not allow you to do this, you need to write to HMRC and ask for the relief. Details on how to do this will be published in due course.
From April 2022, things become a lot simpler. From then on, you’ll be able to apply the relief using real-time information (RTI) as normal, using category letter ‘V’.
If we handle your payroll and you have hired one or more qualifying veterans, be sure to let us know.
3. PAYE changes at Christmas
If you pay employees early during the Christmas period, you need to be aware of how to report this. HMRC advises that you report your normal or contractual payday on your Full Payment Submission (FPS). For example, if you normally pay on 31st December, but decide to pay on 23rd December, report the date as 31st December and send the FPS before that date. It’s important to do this as it protects your employees’ eligibility for Universal Credit.
As always, if you’re a THP client and have any payroll related questions, please get in touch. Similarly, if you’d like us to handle your payroll on your behalf, do drop us a line. We’d be delighted to help.
About Samantha Rowe
Sam’s title is Operations Manager, but the title itself doesn’t truly convey the variety of what she does for THP. From administrative tasks to payroll, strategic business planning, and office systems and procedures, Sam’s primary skill lies in multitasking.
Sam’s journey began as an office junior with George Nottage (now merged with THP), and she soon learned skills in payroll and bookkeeping, and then gained experience as a PA to the Directors, and as Administration Manager.
At the moment, Auto Enrolment is an area that has a key focus for Sam, and for THP as a whole. “The question I’m asked the most by clients just now is, ‘How will auto enrolment affect me?’ And the answer is, no matter how big or small you are, you will absolutely be affected by the Auto Enrolment regulations. I’d encourage you to start thinking about it now, and to look at your payroll software to make sure you’re ready.”