Payroll Legislation 2018/19

Find out how payroll outsourcing can help you keep on top of payroll legislation changes and keep your business is fully HMRC compliant.

Payroll legislation is subject to change – almost every year new legal requirements are introduced by HMRC which can completely change the responsibilities of payroll administrators. No matter when an update in payroll legislation happens, it is essential that companies understand the changes and is able to apply them correctly. Failure to do so could have serious consequences for your business.

Unless otherwise stated, these figures apply from 6 April 2018 to 5 April 2019.

PAYE tax and Class 1 National Insurance contributions

You normally operate PAYE as part of your payroll so HM Revenue and Customs (HMRC) can collect Income Tax and National Insurance from your employees.

Your payroll software or outsourced payroll provider can calculate how much tax and National Insurance to deduct from your employees’ pay.

Tax thresholds, rates and codes

The amount of Income Tax you deduct from your employees depends on their tax code and how much of their taxable income is above their Personal Allowance.

There are different rates for Scotland.

UK

PAYE tax rates and thresholds2018 to 2019
Employee personal allowance£228 per week
£988 per month
£11,850 per year
UK basic tax rate20% on annual earnings above the PAYE tax threshold and up to £34,500
UK higher tax rate40% on annual earnings from £34,501 to £150,000</td
UK additional tax rate45% on annual earnings above £150,000

Scotland

PAYE tax rates and thresholds2018 to 2019
Employee personal allowance£228 per week
£988 per month
£11,850 per year
Scottish starter tax rate19% on annual earnings above the PAYE tax threshold and up to £2,000
Scottish basic tax rate20% on annual earnings from £2,001 to £12,150
Scottish higher tax rate41% on annual earnings from £31,581 to £150,000
Scottish additional tax rate46% on annual earnings above £150,000

Emergency tax codes

The emergency tax codes from 6 April 2018 are:

  • 1185L W1
  • 1185L M1
  • 1185L X

 

Class 1 National Insurance thresholds

You can only make National Insurance deductions on earnings above the Lower Earnings Limit (LEL).

Class 1 National Insurance thresholds2018 to 2019
LEL£116 per week
£503 per month
£6,032 per year
Primary Threshold (PT)£162 per week
£702 per month
£8,424 per year
Secondary Threshold (ST)£116 per week
£702 per month
£8,424 per year
Upper Secondary Threshold (under 21) (UST)£892 per week
£3,863 per month
£46,350 per year
Apprentice Upper Secondary Threshold
(apprentice under 25) (AUST)
£892 per week
£3,863 per month
£46,350 per year
Upper Earnings Limit (UEL)£892 per week
£3,863 per month
£46,350 per year

 

Class 1 National Insurance rates

Employee (primary) contribution rates

Deduct primary contributions (employee’s National Insurance) from your employees’ pay through PAYE.

National Insurance category letterEarnings at or above LEL up to and including PTEarnings above the PT up to and including UELBalance of earnings above UEL
A0%12%2%
B0%5.85%2%
Cnilnilnil
H (Apprentice under 25)0%12%2%
J0%2%2%
M (under 21)0%12%2%
Z (under 21 – deferment)0%2%2%

Employer (secondary) contribution rates

You pay secondary contributions (employer’s National Insurance) to HMRCas part of your PAYE bill.

National Insurance category letterEarnings at or above LEL up to and including PTEarnings above the PT up to and including UELBalance of earnings above UEL
A0%13.80%13.80%
B0%13.80%13.80%
C0%13.80%13.80%
H (Apprentice under 25)0%0%13.80%
J0%13.80%13.80%
M (under 21)0%0%13.80%
Z (under 21 – deferment)0%0%13.80%

 

Class 1A National Insurance: Expenses and benefits

You must pay Class 1A National Insurance on work benefits you give to your employees, example a company mobile phone. You report and pay Class 1A at the end of each tax year.

National Insurance class2018 to 2019 rate
Class 1A13.8%

Class 1B National Insurance: PAYE Settlement Agreements (PSAs)

You pay Class 1B National Insurance if you have a PSA. This allows you to make one annual payment to cover all the tax and National Insurance due on small or irregular taxable expenses or benefits for your employees.

National Insurance class2018 to 2019 rate
Class 1B13.8%

 

National Minimum Wage

The rates below apply from 1 April 2018.

Category of workerHourly rate
Aged 25 and above (national living wage rate)£7.83
Aged 21 to 24 inclusive£7.38
Aged 18 to 20 inclusive£5.90
Aged under 18 (but above compulsory school leaving age)£4.20
Apprentices aged under 19£3.70
Apprentices aged 19 and over, but in the first year of their apprenticeship£3.70

 

Statutory Pay

Statutory Maternity, Paternity, Adoption and Shared Parental Pay

Use the maternity and paternity calculator for employers to calculate your employee’s Statutory Maternity Pay (SMP), paternity or adoption pay, their qualifying week, average weekly earnings and leave period.

Type of payment or recovery2018 to 2019 rate
SMP – weekly rate for first 6 weeks90% of the employee’s average weekly earnings
SMP – weekly rate for remaining weeks£145.18 or 90% of the employee’s average weekly earnings, whichever is lower
Statutory Paternity Pay (SPP) – weekly rate£145.18 or 90% of the employee’s average weekly earnings, whichever is lower
Statutory Adoption Pay (SAP) – weekly rate for first 6 weeks90% of employee’s average weekly earnings
SAP – weekly rate for remaining weeks£145.18 or 90% of the employee’s average weekly earnings, whichever is lower
Statutory Shared Parental Pay (ShPP) – weekly rate£145.18 or 90% of the employee’s average weekly earnings, whichever is lower
SMP/SPP/ShPP/SAP – proportion of your payments you can recover from HMRC92% if your total Class 1 National Insurance (both employee and employer contributions) is above £45,000 for the previous tax year

103% if your total Class 1 National Insurance for the previous tax year is £45,000 or lower

Statutory Sick Pay (SSP)

The same weekly SSP rate applies to all employees. However, the amount you must actually pay an employee for each day they’re off work due to illness (the daily rate) depends on the number of ‘qualifying days’ (QDs) they work each week.

Unrounded daily ratesNumber of QDs in week1 day to pay2 days to pay3 days to pay4 days to pay5 days to pay6 days to pay7 days to pay
£13.15007£13.15£26.30£39.45£52.60£65.75£78.90£92.05
£15.34166£15.35£30.69£46.03£61.37£76.71£92.05
£18.41005£18.41£36.82£55.23£73.64£92.05
£23.01254£23.02£46.03£69.04£92.05
£30.68333£30.69£61.37£92.05
£46.02502£46.03£92.05
Unrounded daily rates1£92.05

 

Student loan recovery

Rate or threshold2018 to 2019 rate
Employee earnings threshold for Plan 1£352.50 per week
£1,527.50 per month
£18,330 per year
Employee earnings threshold for Plan 2£480.76 per week
£2,083.33 per month
£25,000 per year
Student loan deductions9%

 

Business Driving

Company cars: Advisory Fuel Rates (AFRs)

Use AFRs to work out mileage costs if you provide company cars to your employees.

The rates below apply from 1 March 2018.

Engine sizePetrol – amount per mileLPG – amount per mile
1400cc or less11 pence17 pence
1401cc to 2000cc14 pence8 pence
Over 2000cc22 pence13 pence

Petrol & LPG

Engine sizeDeisel – amount per mile
1600cc or less9 pence
1601cc to 2000cc11 pence
Over 2000cc13 pence

Diesel

Hybrid cars are treated as either petrol or diesel cars for this purpose.

Employee vehicles: Mileage Allowance Payments (MAPs)

MAPs are what you pay your employees for using their own vehicle for business journeys.

You can pay your employees an approved amount of MAPs each year without having to report them to HMRC. To work out the approved amount, multiply your employee’s business travel miles for the year by the rate per mile for their vehicle.

Type of vehicleRate per business mile 2018 to 2019
CarFor tax purposes: 45 pence for the first 10,000 business miles in a tax year, then 25 pence for each subsequent mile
For National Insurance purposes: 45 pence for all business miles
Motorcycle24 pence for both tax and National Insurance purposes and for all business miles
Cycle20 pence for both tax and National Insurance purposes and for all business miles

 

Remove The Headache of Constantly Changing Payroll Legislation

Failing to act when new payroll rules are introduced can be costly for any business. Changes, big and small, are always occurring, so it’s crucial that business owners and payroll staff stay up to date.

There are many ways to review new payroll legislation and check your payroll responsibilities as a business owner. Using an outsourced payroll service is a more cost-effective solution that provides 100% peace of mind that your company payroll is all taken care of – eliminating the need to constantly keep abreast of such critical business information.

At FMP Global, we provide a full range of payroll services including payroll bureau services and managed payroll. These outsourcing solutions enable us take care of your company’s payroll responsibilities in order to free up valuable resources and remove the headache of keeping up with payroll legal requirements.