U.K. Chancellor of the Exchequer Rishi Sunak made his budget statement within the House of Commons on 3 March 2021, to advise on the current state of the economy and inform of the government’s future intentions. As always, the speech itself was full of intriguing and interesting headlines, but the more intricate information was to be found within the budget’s accompanying documents.
Here we highlight the measures introduced that would impact the work of payroll professionals, as the U.K., and indeed, the world, continues to combat the coronavirus.
Coronavirus Job Retention Scheme Extension
Prior to a budget, there is always plenty of speculation as to what the key announcements on the big day will be. Rumours had been circling for weeks that the Coronavirus Job Retention Scheme (CJRS) would be extended once again to help businesses and individuals through the continued economic turbulence posed by coronavirus. It was no surprise, then, when the Chancellor confirmed that the scheme would now no longer close at the end of April 2021 as originally intended but would be expected to close on 30 September 2021. This sat in alignment with Prime Minister Boris Johnson’s “roadmap” out of lockdown, and the gradual easing of restrictions at various staggered dates.
With the extension to the scheme came a change to the eligibility criteria. For claim periods commencing on or after 1 May 2021, claims could be submitted for employees who were employed and included on a Pay As You Earn (PAYE) Real Time Information (RTI) submission to HMRC between 20 March 2020, and 2 March 2021. Previously, for claim periods from 1 November 2020, to 30 April 2021, there was a requirement for employees to be included on a PAYE RTI submission to HMRC between 20 March 2020, and 30 October 2020. What the change essentially meant is that more employees would now be eligible for the CJRS for claim periods from May 2021 onward.
The level of government support under the scheme would remain at 80% of an employee’s usual wages for any of the hours that they would normally work, up to a cap of £2,500 per month, until the end of June 2021. For the claim period of July 2021, the amount that employers could reclaim was reduced to 70% of an employee’s standard pay for hours that they would normally work spent on furlough, up to a cap of £2,187.50 per month. Employers are expected to contribute 10% for the claim period of July 2021. For the final months of the scheme—August and September 2021—employers can reclaim 60% of an employee’s usual wages for any of the hours that they would ordinarily work that were spent on furlough, up to a cap of £1,875 per month. For these claim periods, employers are required to contribute 20%.
In addition, there was confirmation that the Coronavirus Statutory Sick Pay (SSP) Rebate Scheme would continue to be available to small and medium-sized employers that had fewer than 250 employees across all of their PAYE schemes as of 28 February 2020. Under the scheme, the government reimburses eligible employers for employees meeting certain criteria for a maximum of two weeks’ worth of SSP. No end date to the scheme was cited.
A Taxpayer Protection Taskforce is due to be established, consisting of 1,265 HMRC staff, with funding of £100 million put toward it. The team will be responsible for tackling the consistently rising levels of fraudulent activity across the coronavirus-related support measures, particularly within the CJRS and the Self-Employment Income Support Scheme (SEISS).
Income Tax Rates, Thresholds Revealed
Prior to the budget, HMRC published the income tax parameters for tax year 2021-2022 to allow software developers and payroll professionals to prepare for the changes. The key headlines are that the Personal Allowance will increase to £12,570, and the Higher Rate Threshold will be increased to £50,270. These rates apply to rU.K., which is the whole of the U.K. except for Scotland. Part of the Chancellor’s speech confirmed that, due to the cost of the response to the coronavirus pandemic, the Personal Allowance, Higher Rate Threshold, and income tax bands will remain at 2021-2022 levels until April 2026.
The Marriage Allowance increased to £1,260, the Blind Person’s Allowance to £2,520, and the Married Couple’s Allowance to a maximum of £9,125 with a minimum of £3,530. The income limit is £30,400.
Most National Insurance Rates Increase
The National Insurance (NI) contribution limits and thresholds for 2021-2022 were also published ahead of the budget. The Lower Earnings Limit (LEL) has remained unchanged at £120 per week, but the other weekly thresholds have all seen a slight increase. The rates for 2021-2022 are as follows:
- Lower Earnings Limit (LEL)–£120 (unchanged)
- Primary Threshold (PT)–£184 (increase from £183)
- Secondary Threshold (ST)–£170 (increase from £169)
- Upper Earnings Limit (UEL)–£967 (increase from £962)
- Upper Secondary Threshold (UST)–£967 (increase from £962)
- Apprentice Upper Secondary Threshold (AUST)–£967 (increase from £962)
The Employment Allowance, available to certain eligible businesses and charities to offset against their Class 1 Secondary NI bill, remains at the 2020-2021 level of £4,000 for tax year 2021-2022.
Measures to Aid Employment
Unfortunately, the pandemic has impacted the work of young people most substantially. The government recognizes this, so several of the measures unveiled at budget place a clear focus on encouraging employers to hire younger people.
It was confirmed that £126 million would be allocated over the course of the 2021-2022 academic year toward work placements and training for 16- to 24-year-olds in England. Additionally, employers that offer work experience for trainees can continue to receive an incentive payment of £1,000 per trainee.
Previously, £1,500 was offered to employers that hired apprentices, and £2,000 if the apprentices were under the age of 25. It was revealed at budget that those employers hiring apprentices between the dates of 1 April 2021, and 30 September 2021, will actually be entitled to a payment of £3,000 per new apprentice, regardless of their age.
The U.K. Budget contained a wealth of information relating to a variety of new measures, not all of which were payroll specific. To find out more, review the budget’s accompanying documents for an overview of all the government’s proposals.
Ordinarily, consultations and calls for evidence are published alongside the budget, but 2021 was different, as 23 March 2021, became “Tax Day.” These documents were published on Tax Day with a request for feedback on some of the government’s plans. We await to see if there is a second budget for 2021, which could be delivered in the autumn. Until then, payroll professionals have plenty to keep abreast of, and will undoubtedly remain extremely busy.
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Lora Murphy, ACIPP, is Policy and Research Officer for the Chartered Institute of Payroll Professionals (CIPP).