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1014. Tax year 2020-21 changes?
 
HMRC's new tax year starts only on 6th April of every year. However the option to start the new tax year in our service is available after 31st March. Our system will be automatically updated and fully compliant with the legislative changes from the start of the new tax year.

When moving to new tax year 2020-21, please take a note of the following changes below :-

1) Global Tax Code set to 1250L
2) Income Tax Rates and Bandwidth
3) Auto Enrolment Minimum Contribution Rates
4) Statutory Payment Rates
5) Student Loan Rates
6) Postgraduate Loan Deductions
7) Company Car Fuel Rates.
8) National Minimum Wage
9) National Insurance contributions.
10) Termination awards and sporting testimonial payments.
11) Employment Allowance.
12) Holiday pay average.
13) Full Payement Submission (FPS) in place of Earlier Year Update (EYU).
14) Off payroll working in private sector.
15) Employer Payment Summary (EPS).

1) Global Tax Code set to 1250L

Employee Personal allowance remain unchanged £12,500 for the tax year 2020-21.

Tax Codes(UK)
Emergency Tax Code 1250L
L Suffix Uplift 65
M Suffix Uplift 71
N Suffix Uplift 59

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2) Income Tax Rates and Bandwidth

Personal allowance will reamin same for the tax year 2020-21. The new threshold for PAYE is £240 per week (£1,042 per month). Below are the income tax rates and bandwidth for UK and Scotland that will come into effect from 6th April 2020.

UK Rate of Income Tax:
Table below shows the changes to UK rate of income tax bandwidths from 6 April 2020.

UK Rate % Bandwidth
Basic Rate 20% £1 to £37,500
Higher Rate 40% £37,501 to £150,000
Additional Rate 45% £150,001 and above

Scottish Rate of Income Tax:
Table below shows the changes to Scottish rate of income tax bandwidths from 6 April 2020.

Scottish Rate % Bandwidth
Starter Rate 19% £1 to £2,049
Basic Rate 20% £2,050 to £12,444
Intermediate Rate 21% £12,445 to £30,930
Higher Rate 41% £30,931 to £150,000
Top Rate 46% £150,001 and above

Welsh Rate of Income Tax:
Table below shows the Welsh rate of income tax bandwidths from 6 April 2020.

Welish Rate % Bandwidth
Basic Rate 20% £1 to £37,500
Higher Rate 40% £37,501 to £150,000
Additional Rate 45% £150,001 and above

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3) Auto Enrolment Mininmum Contribution Rates

The auto enrollement mininmum contribution rate remain unchanged.

Date contribution
Employer Minimum contribution
Employee Minimum contribution
Total Minimum contribution
6th April 2020 onwards
3%
5%
8%

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4) Statutory Payment Rates

Statutory payment rate (weekly) for the tax year 2020-2021 are shown in the table below.

Statutory Sick Pay(Weekly) £95.85
Statutory Maternity Pay (Weekly) £151.20
Statutory Paternity Pay (Weekly) £151.20
Statutory Adoption Pay (Weekly) £151.20
Statutory Shared Parental Pay(Weekly) £151.20
Statutory Parental Bereavement Pay(Weekly) £151.20

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5) Student Loan Rates

From 6 April 2020 onward student loan threshold for

1. Plan 1 will increase from £18,935 to £19,390 per year.
2. Plan 2 will increase from £25,725 to £26,575 per year.

Only thresholds are different for both the plans but the calculation method and deduction rate(9%) remains the same.

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6) Postgraduate loan deductions

The post graduate loan deduction will be remain same.The for post graduationis £21,000 per year and loan deduction rate is 6%.

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For more information click on the link faq: 4802

7) Company cars fuel rates

For the current tax year 2020-21 HMRC needs addtional information about the employee's company's car.Tax will be applicable to those who's car benefit is payrolled (only to payroll application not for the P11D).

The car fuel rate for the year the tax 2020-21 as below:

Engine Size
Petrol-amount per mile
LPG-amount per mile
1400cc or less
12 pence
8 pence
1401cc to 20000cc
14 pence
9 pence
Over 2000cc
21 pence
14 pence

 

Engine Size
Diesel-amount per mile
1600cc or less
9 pence
1601cc to 2000cc
11 pence
Over 2000cc
14 pence

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8) National Minimum Wage Rates Changes

The national minimum wage rate from 1st April 2020 are shown in the below table.

Category of worker
Hourly rate
Aged 25 and above (national living wage rate)
£8.72
Aged 21 to 24 inclusive
£8.20
Aged 18 to 20 inclusive
£6.45
Aged under 18 (but above compulsory school leaving age)
£4.55
Apprentices aged under 19
£4.15
Apprentices aged 19 and over, but in the first year of their apprenticeship
£4.15

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9) National Insurance Contribution

National Insurance Contributions(NIC) Rates for the tax year 2020-21 are shown in below tables.

Employee NI Rates expressed as decimal

National Insurance category letter Earnings at or above LEL upto and including ST
Earnings above ST up to and including UEL/UST/AUST Balance of earning above UEL/UST/AUST
A 0 0.12 0.02
B 0 0.0585 0.02
C NIL NIL NIL
H 0 0.12 0.02
J 0 0.02 0.02
M 0 0.12 0.02
Z 0 0.02 0.02
 

Employer NI Rates expressed as decimal

National Insurance category letter Earnings at or above LEL upto and including ST Earnings above ST up to and including UEL/UST/AUST
Balance of earning above UEL/UST/AUST
A 0 0.1380 0.1380
B 0 0.1380 0.1380
C 0 0.1380 0.1380
H 0 0 0.1380
J 0 0.1380 0.1380
M 0 0 0.1380
Z 0 0 0.1380
 

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10) Termination awards and sporting testimonial payments

Class 1A National Insurance contributions are due on the amount of termination awards paid to employees which exceed £30,000 and on the amount of sporting testimonial payments paid by independent committees which exceed £100,000. You report and pay Class 1A on these types of payments during the tax year as part of our payroll.

National Insurance class
2020 to 2021 rate
Class 1A
13.8%

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11) Employment allowance

The rules regarding which businesses qualify for the Employment Allowance (EA) change from April 2020. The amount of the EA is also changing, and will be £4000 for 2020-21 (the EA was £3000 in 2019-20) . It is important that you understand these new rules before claiming the EA for 2020-21.

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12) Holiday pay average

The government has been decided to increase the holiday pay reference period from 12 to 52 weeks.This change will be applied for the sesonal variation in pay for many casual workers.The HMRC mentions that holiday pay reference period should include as many whole weeks of pay information as are available (if the pay period is less than 52 weeks).This change in holiday pay refernce will come in effect from 6 April 2020.

13) Past year Full Payement Submission (FPS) in place of Earlier Year Update (EYU)

Earlier we used to submit EYU for any errors of made in previous year used correct and submit the EYU but from this current tax year 2020-21 HMRC allows to submit the FPS for the final period of last year.

14) Off payroll working in private sector

Off payroll working the workers who provides the services through intermediary.The intermediary usally be the own personal complay , a partnership, a managed service or individual company this rule is also knwon as ‘IR35’.From 6 april 2020 if the off-payroll working rules apply, your worker’s fees will be subject to tax and National Insurance contributions.

If your worker provides services to a public sector client, or a medium or large-sized private sector client, they:

  • Should get an employment status determination from the client, as well as the reasons behind that determination.
  • Will be able to dispute the determination given to them if they disagree with it.

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15) Employer Payment Summary (EPS)

The new change in EPS from this tax year onwords are you need to fill the addtional information about the employer before you file the EPS to HMRC.The addtional information required is,

Economic Activity Details:

  • Is Employer in Agricultural sector?
  • Is Employer in the Fisheries and Aquaculture sector?
  • Is Employer in the Road Transport sector?
  • Is Employer in the Industrial sector?
  • Do State-aid rules apply to the Employer?
Note: You can only fill these section when the Employment Allowance Indicator is "YES". Without the indicator is yes you can't fill the Economic activity details.