21 March 2021
The CIPP’s policy and research team provides a summary of the announcements
The 2021 Spring Budget was delivered on 3 March, with the chancellor explaining that though the pandemic has had a detrimental impact on the economy and on jobs, things were not as bad as initially anticipated. Indeed, the Office for Budget Responsibility (OBR) confirmed that the economic growth towards the end of 2020 was stronger than initially predicted: although output was 6.3% lower than in February 2020, this was approximately 1% higher than expected. Additionally, the unemployment rate, which will reach its highest level in the fourth quarter of 2021, will equate to 6.5% but this is 1% below the figure OBR estimated in November 2020.
There were numerous announcements made in the Budget, all of which will have impacts on various sectors and areas of society and life. Of key interest to the CIPP was, of course, any news that will directly influence the work of payroll professionals. A summary of the main points for the profession to be aware of has been collated below.
In closing his speech, the chancellor stated how the spring 2021 Budget had been tailored to meet the requirements of the current social and economic circumstances.
...government support will remain unchanged at 80% of an individual’s standard pay, for any usual hours not worked, until 30 June 2021, capped at a limit of £2,500 per month.
Extension of the CJRS
Rumours had been circulating for months that the coronavirus job retention scheme (CJRS) would be extended once again, to support employers and their workers through the pandemic. This seemed to be confirmed when prime minister Boris Johnson unveiled the ‘roadmap’ out of lockdown, revealing that several restrictions would have to remain in place until mid-to-late June 2021, at the very earliest.
The CJRS has been extended until the end of September 2021, and the level of government support will remain unchanged at 80% of an individual’s standard pay, for any usual hours not worked, until 30 June 2021, capped at a limit of £2,500 per month. Employers will still be required to pay staff for any hours that they work at their contractually agreed rate, and the associated liabilities, as well as employer’s National Insurance contributions (NICs) and minimum auto-enrolment (AE) pension contributions for any hours that an employee spends on furlough.
Commencing 1 July 2021, the level of government support will begin to taper. For July, the government will subsidise 70% of an individual’s normal pay up to a cap of £2,187.50 per month; and employers will be required to contribute 10%. For August and September 2021, the level of support will reduce to 60%, capped at £1,875 per month; and at this point, it will be mandatory for employers to pay 20% of the worker’s usual pay.
CJRS guidance (http://ow.ly/CMXy30rzOg5) was updated to confirm that for claim periods from 1 May 2021 onwards, eligibility for the scheme would be widened. From that point, claims can be submitted for any employees who were employed as of 2 March 2021, who had been included in a pay as you earn (PAYE) real time information (RTI) submission to HM Revenue & Customs (HMRC) between 20 March 2020 and 2 March 2021. There is no requirement to have claimed for an employee prior to 2 March 2021 for claim periods commencing on or after 1 May 2021. For the claim periods of March and April 2021, however, the previous rules still apply, so individuals must have been on payroll and included in a RTI submission between 20 March 2020 and 30 October 2020 in order to be eligible.
At the CIPP, we are aware that the next big activity for HMRC will be related to ensuring compliance with the CJRS, and the other measures implemented during the pandemic. Payroll professionals are reminded to check that claim submissions are correct, and to ensure that they are adhering to the record-keeping requirements associated with the scheme, in order to ensure that they are fully prepared should HMRC conduct an audit or visit. This is reiterated in the fact that it was confirmed within the Budget’s accompanying documents (see http://ow.ly/Y0Kj30rzOm3) that a new Taxpayer Protection Taskforce will be established to combat the rising levels of fraud taking place across all the coronavirus support packages. The government is contributing £100,000,000 in funding towards this new team, which will consist of 1,265 HMRC staff.
The SSP rebate scheme
The statutory sick pay (SSP) rebate scheme – which provides a refund of up to two weeks’ worth of SSP for coronavirus-related absence to employers that had fewer than 250 employees across all their PAYE schemes as of 28 February 2020 – is still in operation. No official end-date has been supplied, but steps for ending the scheme will be announced at a later date.
The income tax limits for tax year 2021/22 were published by HMRC in February, earlier than the Budget, in order to give employers and payroll software developers sufficient time to make preparations for the changes to be implemented at the start of the new tax year.
It was announced that the personal allowance would increase to £12,570 and the higher rate threshold (HRT) would be increased to £50,270, meaning that this will be the new point at which higher earners begin to pay 40% tax. These were affirmed within the Budget speech, in which we were also informed that thresholds would be frozen at 2021/22 levels until April 2026.
The income tax bands and rates for rest-of-UK, which excludes Scotland, will be:
Basic rate (20%) – £1 to £37,700
Higher rate (40%) – £37,701 to £150,000
Additional rate (45%) – over £150,000.
The income tax bands for Scotland:
Starter rate (19%) – £1 to £2,097
Basic rate (20%) – £2,098 to £12,726
Intermediate rate (21%) – £12,727 to £31,092
Higher rate (41%) – £31,093 to £150,000
Top rate (46%) – over £150,000.
Other allowances were also confirmed for tax year 2021/22.
The marriage allowance, which is commonly referred to as the ‘transferable tax allowance’, will rise to £1,260; and the blind person’s allowance will also increase to £2,520. The maximum married couple’s allowance will increase to £9,125 – the minimum is £3,530 – with an income limit of £30,400.
With the same motivations as the early publication of tax information, the class 1 NICs limits and thresholds were published prior to the Budget.
There are amendments to all of the weekly limits, with the exception of the lower earnings limit which will stay at £120; the primary threshold will increase to £184; the secondary threshold will increase to £170; and the upper earnings limit (UEL), upper secondary threshold for under 21s, and the apprentice upper secondary threshold for under 25s, will increase to £967 a week.
There was also confirmation that the UEL will be kept at the rate of £50,270 until April 2026.
The employment allowance for 2021/22 will also remain unchanged and will remain at £4,000 for certain eligible businesses and charities.
Support for jobs
A significant amount of funding is being invested into supporting jobs, and a substantial part of that will be geared towards encouraging employers to hire younger people. Some £126,000,000 will be put towards high quality work placements and training for 16–24-year-olds; and employers will continue to receive £1,000 per trainee for each trainee to whom they provide work experience.
To incentivise businesses to hire new apprentices, the current £1,500 payment given per apprentice (which is £2,000 if the apprentice is below 25) will be doubled to £3,000, irrespective of the apprentice’s age. Some £7,000,000 will be contributed towards ‘flexi’/portable apprenticeships, which will allow apprentices to work on several projects with various employers, as opposed to being restricted to working exclusively with one employer.
Similarly, it has been announced that to incentivise younger people to get into work the government is still seeking to extend the reach of the national living wage (NLW) to those aged 21 and over, by 2024. We know that the NLW will begin to apply to those aged 23 and above from 1 April 2021, having previously only being available to anyone 25+. The government’s remit to the Low Pay Commission (LPC) also reiterates the intention for the NLW to reach two third of median earnings within that same timeframe – by 2024.
More broadly, over the course of 2021/22 and 2022/23, £1,300,000 will be put towards the piloting of new technologies to support people in finding jobs.
And there’s more?
Ordinarily, on Budget day, there would be a raft of consultations and calls for evidence published. However, before the Budget was delivered, we received confirmation that documents of this nature would be held back and not released until 23 March 2021. This has now been dubbed ‘Tax day’.
We could potentially see substantially more on ‘Tax day’, particularly around the government’s ten-year tax administration strategy which could signal fundamental changes to the tax system as we know it. We are intrigued to see what will be published, and will cover relevant issues going forward.
Whether there will be an autumn Budget this year remains to be seen, but in the interim we believe that there is plenty for payroll professionals to familiarise themselves with ahead of the new tax year. n
Featured in the April 2021 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.