Easing lockdown signals start of new tax yearby
Kate Upcraft summarises the important PAYE and payroll changes coming into effect on 6 April 2021, which may correspond with an opening up of the economy after Easter.
The software industry and accountancy bodies managed to lobby HMRC to produce the information required to allow payroll software to be updated ahead of Budget day on 3 March.
If they hadn’t succeeded, any announcements made that day would have been too late for any legislative changes to be in place from 6 April. The key income tax rates, allowances and thresholds for 2021/22 are summarised here.
Employers have now received SL1 notices to instruct them to move employees out of student loan plan 1 and into the newly created plan 4, which applies to anyone who took out an award from Students Awards Agency Scotland and has a repayment threshold of £25,000.
Plan 4 doesn’t just apply to employees based in Scotland as it is dependent on where the repayer was living at the time they first took out their loan. If any “switch” notices are not actioned the employer will have to refund any overpaid deductions in the May payroll.
As a result of the introduction of Plan 4, an amended new starter checklist has been introduced. Only one undergraduate plan can be in operation at any one time. If the new starter has indicated that they have more than one undergraduate loan plan, the employer should default to the loan plan with the lowest earnings threshold for the tax year concerned.
There is an amended P60 for the 2020/21 tax year. This has been necessitated by the introduction of statutory parental bereavement pay in April 2020.
HMRC recently announced it will no longer need to approve P60 stationery. This is welcome news because it had not been able to approve any stationery that has already been embedded in 2021/22 software due to lack of resources.
HMRC no longer provides P60 stationery to employers, so this has to be produced by payroll software or purchased from a commercial supplier.
Abolition of the Earlier Year Update (EYU)
After a two-year parallel run, the EYU will no longer be a valid file for correcting the 2020/21 tax year and for future years. All payroll software products should now have converted to being able to send a YTD FPS if a correction needs to be made to the prior year after 19 April post tax year end
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