UK Payroll Legislation Changes for 2020/2021 Tax Year

On 6 April 2020 a new tax year started, bringing with it a new set of rules. So, we’ve highlighted the main payroll legislation changes you need to be aware of.

This includes new legislation, changes to legislation and delays to legislation being implemented due to COVID-19.

In addition, for more detailed information on what’s changed, you can download our Payroll Legislation Guide.

1. COVID-19 Job Retention Scheme

On Friday 20 March 2020, Chancellor Rishi Sunak set out a package of temporary measures to support UK businesses through this period of disruption caused by the COVID-19 / Coronavirus outbreak.

One of those packages announced was the Job Retention Scheme, which is a scheme to support employees during the pandemic.

The scheme is currently available until the end of June 2020. It allows all UK employers to access financial support to continue paying part of their workers’ wages for those that would have otherwise been laid off during the COVID-19 outbreak.

It applies to all UK businesses who had a PAYE payroll scheme registered on HMRC’s real time information system for PAYE on the 19 March 2020 (defined as “a qualifying PAYE scheme”).

2. Statutory Sick Pay for COVID-19 Related Sickness

The Department for Work and Pensions confirmed that all those advised to self-isolate will be entitled to Statutory Sick Pay, even if they have not presented with symptoms.

Statutory Sick Pay (SSP) will be paid to all qualifying employees from day one for COVID-19 / Coronavirus related sickness, including self-isolating.

This took effect from 13 March 2020 and the measure will last for at least eight months. The emergency legislation (2020 no 287) was passed via a statutory instrument to amend the Statutory Sick Pay (General) Regulations 1982. This confirms that a person who is self-isolating to prevent infection or contamination with the coronavirus disease, is deemed unable to work.

For more information you can read our FAQs: Statutory Sick Pay for Coronavirus / COVID-19 blog.

3. Postponement of Off-Payroll Working in the Private Sector

Off-payroll working in the private sector has been postponed. This is in response to the ongoing spread of COVID-19. The legislation is now expected to take effect on 6 April 2021, rather than 6 April 2020.

Financial Secretary to the Treasury Jesse Norman said: “We will do whatever it takes to support the British economy through COVID-19. That is why, as well as the current support measures we have announced, we have delayed the off-payroll working reforms to April 2021”.

You may remember that in April 2017, the government reformed the off-payroll working rules in the public sector. This shifted the responsibility for determining employment status from the individual working through the intermediary to the public authorities engaging them. In addition, the reform made the public authority or agency that pays the worker’s intermediary responsible for accounting for and paying income tax and NICs under PAYE to HMRC, on behalf of the worker.

In 2018 the government announced the reformed rules would also be extended to medium and large organisations in the private sector in April 2020. This has now been postponed to April 2021.

From 6 April 2021, medium and large-sized private sector businesses that employ the services of a contractor through an intermediary, often known as a Personal Service Company (PSC), will be responsible for determining their employment status and paying income tax and NICs under PAYE to HMRC.

4. Employment Allowance Increase

From 6 April 2020, HMRC introduced new rules for claiming employment allowance. Employers whose NI bill was £100,000 or more in the previous tax year are no longer be eligible to claim employment allowance.

In addition, employment allowance is now classed as De Minimis State Aid. Employment allowance cannot be rolled over from one tax year into the next. The employer must apply for and declare that they are eligible each year.

The eligibility criteria:

• Must have class 1 Secondary National Insurance contributions in the previous tax year (including any connected companies) of less than £100,000
• Only one of the connected companies can claim the allowance
• Receiving the full Employment Allowance which has increased from £3,000 to £4,000 when added to any other de minimis state aid received or allocated, will not result in exceeding the de minimis state aid threshold for your business sector(s) in the relevant 3-year period (the 2 years previous and the current year). This is regardless of whether the full £4,000 is claimed.

5. Suspension of Gender Pay Gap Reporting

Enforcement of the gender pay gap reporting requirements has been suspended for a year due to the coronavirus outbreak.

Usually, mandatory gender pay gap reporting applies to the following businesses:

• 250+ employees
• Employees ordinarily work in Great Britain and their contract is governed by UK legislation

6. The Parental Bereavement (Pay & Leave) Act

This legislation will grant two weeks’ paid leave to any employed parent who loses a child under the age of 18. Every employee is eligible for this right, irrespective of their length of service. Employed parents with at least 26 weeks’ continuous service are also eligible to receive statutory parental bereavement pay.

The pay entitled to employees should include all hours worked where they vary each pay period, including for salaried workers.

Employers will be able to recover statutory bereavement pay from HMRC. Large firms with annual National Insurance contributions of over £45,000 will be entitled to recover 92% of money paid. All other employers will be entitled to recover 103%.

Payroll Legislation Guide

Keeping up with payroll legislation changes is hard work. Just when you think you’re compliant – there’s something new to remember! You can download our comprehensive Payroll Legislation Guide for details of all the payroll legislation changes you need to be aware of in an easy-to-read format.

**Information in this blog was correct at the time of writing. However, with government and legislation changes happening daily some of this may now be out of date.**