Changes to PAYE Legislation from April 2021

Thu, Apr 1, 2021

We’ve pulled together this handy breakdown to help you understand the changes which 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 most significant changes to be aware of this year is to the National Living Wage. As of April 2021, the National Living Wage will include workers aged 23 and 24. 

Previously, the National Living Wage applied to employees aged 25 and over, meaning that millions of additional young workers are set to benefit from an increased hourly rate of pay.  

Here’s a breakdown of this year’s rates:

Since its introduction in 2016, it’s thought that a full-time worker receiving NLW will have received around £4,030 increase in annual earnings.  
 
Employers also have the option of paying their employees the ‘Real Living Wage’, this is a voluntary rate calculated by the Living Wage Foundation as being a truer reflection of what employees need to earn to meet the rising costs of living. The new Real Living Wage rate is £9.50 across the UK and £10.85 for London. 

What is the personal allowance for 2021/22? 

Personal allowance is the amount of income that you do not pay tax on. The amount of tax you pay in each tax year depends on how much of your income is above your personal allowance and how much of your income falls within each tax band. 

2021 sees a minimal increase of £70 to the standard personal allowance, taking it up to £12,579 for the year. This means that as of 6th April 2021 the standard tax code will be 1257L resulting in just £14 additional income. 

It is worth mentioning that employees who are married or in a civil partnership may benefit from claiming Marriage Allowance if one partner is not earning up to their personal allowance. Up to £1,250 of their remaining allowance can be transferred to the other partner which could result in an additional £20 to £30 per month through an adjustment to the tax code. Employees can check their eligibility and claim for Marriage Allowance online using this link.

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 changes?

As an employer, you should make yourself aware with any changes that can affect your staff. Whoever is responsible for your payroll should have expertise in all of these areas and be fully up-to-date with any upcoming changes.  

At Portt & Co, our expert and well-established payroll service provides business owners with peace of mind, meaning that your most valuable assets are paid accurately and on time.