Autumn Statement may cause chaos for Payroll Departments as HMRC faces cuts

25th November 2015



“This afternoon George Osborne, the Chancellor, has provided us with his Autumn Statement which as predicted highlighted a raft of changes affecting payroll, such as the rise in pension contributions, rise in apprenticeship levy and the announcement that tax credits will not be scrapped.

From a payroll perspective, the most critical item which was discussed in the Chancellors statement was the proposed changes to the HMRC, and the digitisation of the tax system, which means that 137 offices will be closed and replaced with thirteen regional centres.

While changes to the HMRC may seem like a strong move by the Chancellor, the already over-burdened customer service desks may struggle under the weight of having to deal with more enquiries, and given the recent report commissioned by the government which states that HMRC’s customer service is so bad it poses a ‘genuine threat to tax collection’, more pressure than ever will be placed on the shoulders of Payroll Departments.

For Payroll Departments having to pick up the slack, getting answers to queries regarding payslips and other tax issues will become a very real problem. And whilst the end result may make life easier, past experience has demonstrated that these changes do come with teething problems particularly, when the existing system is not functioning with all cylinders blazing as it should do – this change leaves payroll teams with a very real concern over the future of the industry.”

Other points raised in the Chancellors statement which will affect the Payroll industry are:

  • The minimum contribution rate, scheduled to rise to 5 per cent in October of 2017 and then 8 per cent in October 2018 has been pushed back by six months to “simplify the administration of automatic enrolment for small employers” as they prepare to automatically enrol millions of staff.
  • State pension to rise by £3.35 a week to £119.30 next year
  • Savings credit to be frozen at current level
  • New rate for the basic state pension will be £155.65.
  • Tax credits cuts scrapped
  • Osborne says the government is making the largest ever investment in free childcare. It will be available from 2017. But it will only be available to families working a certain number of hours per week.
  • Part-time students will be able to receive maintenance loans.
  • The apprenticeship levy to raise £3bn a year. It will be set at 0.5% of the payroll bill. But there will be a £15,000 allowance, so 98% of employers will not pay.