Are you prepared for the 2019/20 payroll changes?
The Autumn Budget 2018 announced changes to tax and NI limits. What do you need to know to prepare for the 2019/20 payroll year?
The personal tax allowance has increased, for 2019/20 it will rise by an additional £650 to £12,500 a year from 6 April 2019.
All ‘L’ suffix codes will need to increase by 65 for 2019/20 unless you receive an amended tax code notification. For example, code 1185L becomes 1250L.
National Insurance (NI)
The employment allowance which relieves employers of the first £3,000 of employers’ NI is still available for 2019/20 to all employers. However, from 5 April 2020, it will be restricted. Only employers with a NI liability below £100,000 in the prior year will qualify.
The NI thresholds have increased. Both employees and employers Class 1 NI will be due on earnings over £166 per week (£8,632 a year).
If you have an employee who is under 21, check that you are using the NI category letter M instead of A. While they still have to pay employees NI on earnings over £162 per week, your company won’t have to pay 13.8% employers NI on earnings between £166 and £962 per week. This also applies to apprentices who are under 25 – the NI code you should use in this instance is H.
Optimum director shareholder salaries and dividends.
Director shareholders not bound by minimum wage requirements can receive a salary of £719 per month tax and NI free and up to £3,447 per month in dividends if the following applies:
- they don’t have an employment contract, so the national minimum wage doesn’t apply;
- your annual employers’ NI bill is already more than £3,000 so you will have fully utilised the employment allowance;
- they have not yet accrued maximum entitlement to the state pension.
It is essential that you calculate this correctly and if you are in any doubt, then seek professional financial support.
Are you prepared for the 2019/20 payroll changes? Or do you feel overwhelmed and need support with your company finances? MRA specialise in Life Centred Business Solutions and can assist you with your company accounts, corporate taxation and strategic structuring to ensure that you are fully prepared for the year ahead. Contact us today to find out how we can help.
Life Centred Planners help individuals, businesses and families achieve the best quality of life they can with the resources they have. MRA specialise in corporate solutions, cash-flow analysis, taxation, debt management, savings and investments, life centred planning and much more. Life Centred Financial Planners are passionate about working with you to help you achieve your life and financial goals, get control of your finances to enjoy a brighter financial future.