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Four 2016/17 payroll changes that you need to be ready for

Practically every year, The Chancellor introduces changes that have an impact on how you run your payroll. This is certainly true of the 2016/17 tax year. Below is a summary of the major changes to help you to determine whether you have made the necessary changes to your payroll systems:

The introduction of Scottish income tax rate

If you employ someone whose main address is in Scotland, some of their income tax will be payable to the Scottish government. For the 2016/17 tax year, it is 10%.

The only change you will see is that some of your employee’s tax codes will start with an S. HMRC will collect the tax for both the Scottish and UK governments in the usual way. This year, the impact of this change is limited. However, you still need to be aware of the change, and familiar enough with the regulations to answer your employees’ questions.

Changes to how benefits in kind are taxed

How benefits in kind (BiK), such as gifts from employers, are taxed is changing substantially. In the past, those who earned £8,500 or less per year paid no income tax on BiKs. This year they will have to. The PD9 form is to be scrapped, but P11D forms will still be needed.

In addition, employers will have to pay Class 1A NI of 13.8% on all BiKs. They will now be treated the same way as any other form of employee payment.

To encourage better tracking of BiKs, employers will now be allowed to include some of them in their payroll calculations. This includes cars, fuel, private medical insurance and subscriptions like gym memberships paid for by the company.

Changes to expenses and subsistence payment taxation

There are also changes to how subsistence allowances and expenses are taxed. These changes are quite complex, so if you pay expenses or make subsistence payments you need to go over the new rules in detail.

Changes to how apprentices are taxed

If you employ apprentices that are aged under 25, you may no longer need to make Class 1 secondary National Insurance contributions (NICs) for them.

This is a summary of the main changes, which will affect the majority of our readers. The other changes to the employee tax regulations are less likely to affect you. However, it is still wise to find out about them and double check. If you have not yet reviewed your payroll procedures with your accountant to make sure they are up to date, we suggest you do so before the end of the month.

Posted by Mark
April 27, 2016

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