Legislation changes for 2016/2017 tax year

With Sage One Payroll, you can be confident that your service is always up to date with the latest legislation. You don’t need to do anything, as it automatically updates with the rates and thresholds for the new tax year.

Scottish rate of income tax

From 6 April 2016, any employees who live in Scotland will receive a new tax code and pay the Scottish rate of income tax (SRIT). The Scottish tax code is the same as the rest of the UK, but the normal tax code is prefixed with S, for example, 1100L becomes S1100L.

Sage One Payroll for the 2016/2017 tax year contains all of the correct legislation for SRIT, therefore all you need to do is to apply any tax code changes you receive from HMRC.

To update an employee’s tax code

  • 1. Employees tab > click the employee > Edit.
  • 2. Current Tax Details section > change the tax code > Save.

Tax rates and bands

The following table displays the new bands, effective from 6 April 2016:

Rate From (£) To (£) Rest of UK Rate Scottish Rate
Basic Rate 0.01 32,000.00 20% 20%
Higher Rate 32,000.01 150,000.00 40% 40%
Additional Rate 150,000.01 N/A 45% 45%

The emergency tax code for 2016/2017 is 1100L.

From 6 April, all L suffix tax codes increase by 40. The M and N suffix tax codes also increase by 44 and 36 respectively.

When you process the first pay run of the new tax year, Sage One Payroll prompts you to update your employees’ tax codes.

If HMRC have sent you a P9 notice for individual employees, you should change the tax code in the relevant employee record.

Employer national insurance (NI) contributions for apprentices under 25

From 6 April, you no longer have to pay employer’s NI contributions for apprentices under the age of 25 on earnings up to a new Apprentice Upper Secondary Threshold (AUST).

To accommodate this, you should use the new NI category, H, for apprentices under the age of 25.

If you have any employees under 25 who you employ as an apprentice, you must change their NI category before you process their pay in the new tax year.

To update an employee’s NI category

  • 1. Employees tab > click the employee > Edit.
  • 2. Current Tax Details section > change the NI category > Save.

NI thresholds

Earnings Limit Weekly (£) Monthly (£) Yearly (£)
Lower Earnings Limit (LEL) 112.00 486.00 5,824.00
Primary Threshold (PT) 155.00 672.00 8,060.00
Secondary Threshold (ST) Employer threshold only 156.00 676.00 8,112.00
Upper Earnings Limit (UEL) 827.00 3583.00 43,000.00
Upper Secondary Threshold (UST) 827.00 3583.00 43,000.00
Apprentice Upper Secondary Threshold (AUST) 827.00 3583.00 43,000.00

For more information about the NI thresholds and rates for the 2016/2017 tax year, visit the HMRC website.

Statutory payment rates and thresholds

Payment Weekly (£) Rate (%)
Statutory Maternity Pay (SMP) 139.58 90.00
Statutory Paternity Pay (SPP) 139.58 N/A
Statutory Paternity Pay Adoption (SPP) 139.58 N/A
Shared Parental Pay (ShPP) 139.58 N/A
Statutory Adoption Pay (SAP) 139.58 90.00
Statutory Sick Pay 88.45 N/A

HMRC have confirmed there’s no increase to the 2015/2016 tax year statutory payment rates for the 2016/2017 tax year.

NI employment allowance

In April 2014, the government introduced employment allowance which allows you to reduce your NI contributions.

On 6 April 2016, your employment allowance increases to £3,000. However, if your business has a sole employee who is also a director, you’re no longer eligible for employment allowance. If you’re unsure whether or not you qualify, you must speak to HMRC.

If you can claim employment allowance, you can do this when you record your payment to HMRC and submit an employer payment summary (EPS) in the new tax year.

Student loan rates

From 6 April 2016, there are two types of student loan repayment plans.

For any loan repayments due to start from 6 April 2016, the SL1 notification you receive from HMRC specifies which repayment plan the employee is to be on.

When you set up a student loan deduction for an employee from 6 April, you must specify whether they’re on Plan 1 or Plan 2. The repayments deduct based on the following thresholds:

Type Weekly (£) Monthly (£) Annual (£) Rate (%)
Plan Type 1 336.44 1457.91 17,495.00 9.00
Plan Type 2 403.84 1750.00 21,000.00 9.00

Introduction of the national living wage from 1 April 2016

From 1 April 2016, the government introduces a new mandatory national living wage (NLW) for employees aged 25 and above. The rate from 1 April is £7.20 per hour, a 50p increase from the current national minimum wage of £6.70.

This comes into effect from 1 April rather than the start of the new tax year. This means you must ensure you’re paying your employees the correct rate of pay from this date. For most people, this falls into the first pay period of the new tax year. However, if you have an extra pay run in the 2015/2016 tax year, you need to ensure you’re paying the NLW rates.

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