As we approach Christmas and start looking forward to the New Year, I thought I would take a quick look at what is likely to affect the payroll in 2017.
What do you think will have the biggest impact on the payroll industry? Please comment, like or share and let us know!
1. The Brexit Effect
One of the major game-changers that will drastically affect the UK payroll in the coming years is the UK’s decision to finally “Brexit” from the EU. How will this impact the UK payroll industry in 2017? This decision will undoubtedly affect the UK payroll industry but to what extent is still unknown. The questions that remain are not just “what” changes are to be expected but “when” the impact of this decision will take effect on the UK payroll industry. The UK still needs to trigger Article 50 of the EU Treaty, and it will still take about two years or more until we have fully exited from the EU – which means that this significant game-changing event is likely to happen at a slow pace. This will give time for companies and providers to prepare their payroll departments, systems and processes to ensure that their respective payrolls remain legislatively compliant with all the changes that may be necessary as a result of Brexit.
In the meantime, according to Helen Hargreaves, the associate director of policy and research at the CIPP (Chartered Institute of Payroll Professionals), it remains “business as usual” for payroll departments until all the Brexit discussions are finalised.
2. New Tax Year, New Changes
There is no doubt that the new tax year 2017-18 will bring with it major payroll changes that will impact both employers and employees. The Chancellor, Philip Hammond delivered his Autumn Statement and hinted towards some significant changes being expected especially concerning taxation.
Here are just some of the few points discussed:
Salary Sacrifice or “Salary Swapping.”
Arrangements for changes to taxation treatment for those using salary sacrifice. This means removing the income tax and the employer’s NIC Contribution Class 1A advantages from salary sacrifice arrangements. Ultimately, this will mean that employees who swap salary for benefits will have to pay the same tax as employees who pay them out of their income.
However, other salary sacrifice arrangements like the following will be protected:
· Employer-provided childcare vouchers/benefits
· Cycle to work
· Ultra Low Emission Cars (75g CO2/km)
All arrangements that made before April 2017 will be protected until April 2018 the following year, while other provisions concerning accommodations, cars and school fees will be protected up to April 2021.
Employees’ Tax Relief
Employees who used their own money can now claim tax relief for purchased goods and services that they haven’t been reimbursed for. Travel fees, business mileage, services used and other products purchased are a few examples. Tax relief can be claimed through HMRC.
The New “Living” Wage
Starting April 2016, the new living wage for employees over 25 will be raised to £7.20 per hour from the current £6.70 per hour rate. Simply put, there will be a new minimum wage rate for workers over the age of 25. Employers all over the country must now consider a new wage scheme for employees with different rates while complying to the national minimum wage and considering the age group and other set rates by the living wage foundation.
Simplified Pay as you earn settlement agreements:
The significant event that started from UK’s decision to exit the EU; to the changes announced from the autumn statement concerning taxation treatment, measures are now being put in place to put the payroll system in line for proper transitioning.
Scottish Rate of Income Tax
Residents of Scotland will have to pay the required Scottish rate income tax based on their pension, wage and other taxable income. Employers are advised to await HMRC’s notice before using a Scottish tax code. HMRC will determine who the Scottish taxpayers will be.
To address this, employers are reminded to make sure that all employees update their correct address information in the HMRC’s database. This is a crucial step that will determine if he/she is a Scottish taxpayer. Updates can be easily made online.
Other Key Points Discussed:
· Termination payments
· Introduction of a new student loan plan – type 2
· Increase in personal allowance to £12,500
· HMRC will no longer grant dispensations from reporting certain expenses
These changes are just some of the issues that will affect payroll departments in 2017. Payroll departments will undoubtedly need to implement changes. The nature of payroll and associated legislation requirements are ever-changing subsequently the role of the sharp-eyed payroll manager remains as important as ever if businesses want to ensure they remain compliant in the New Year.
This article was submitted by Nick Day, Managing Director of JGA Recruitment – the leading Payroll, HR & Reward Recruitment Specialists.
James Gray Associates Ltd
Payroll, HR & Reward Specialist Recruiters
Tel: 01727 800 377