So much to look forward to
12 January 2018
This article was featured in the February 2018 issue of the magazine.
Neil Tonks MCIPPDip, legislation manager at MHR, previews prospective changes and their potential impact
The coming 2018–19 tax year is a relatively quiet one for payroll, with no major new initiatives to cope with. Lots of routine changes and upgrades, of course, but nothing on the scale of the apprenticeship levy or optional remuneration arrangements. However, there are some things which might come along in future years and which have the potential to keep us busy.
Firstly, we have the General Data Protection Regulation looming in a few months. There’s far too little space here to cover this huge topic, but you do need to get familiar with it. There have been many articles on the subject in this magazine and others. Most payroll system providers are supplying their clients with details of how their products are affected, and the CIPP is taking a lead in trying to get some payroll-centric guidance issued. Therefore, there’s no shortage of information, so really no excuse for being ignorant of such an important topic.
Next year (April 2019) we should have the National Insurance contributions (NICs) changes which were deferred for a year last autumn. Chief amongst these in payroll terms is the imposition of Class 1A NICs on termination payments over £30,000. The reform of NICs arrangements for the self-employed were also deferred and will also happen at the same time, though this aspect is subject to consultation, so the details may change.
Also in 2019 we have the introduction of Welsh income tax, as the legislature in Cardiff gets similar powers to those in Scotland, which will involve the introduction of Welsh tax codes identified by a prefix letter. This will probably be ‘W’ although I have seen it suggested that it may be ‘C’ (the first letter of ‘Cymru’, the Welsh name for the country). For employers, thankfully, Welsh tax will be fairly inconsequential as payroll systems will perform the necessary calculations automatically, while the new tax codes will be issued by HM Revenue & Customs (HMRC) via the normal routes.
...Welsh tax will be fairly inconsequential as payroll systems will perform the necessary calculations automatically...
Finally, for 2019, we should have the first repayments of postgraduate student loans. There are, as yet, few details of how these will work, but we believe employers may need to deduct these in addition to a plan 1 or 2 loan. This will mean that payroll systems need the ability to hold concurrent details of liability to these types of deduction, and payslips will need to be able to show two separate student loan deduction lines.
Concurrent plan 1/2 and plan 3 loans would mean some people, if they have a tax code less than the standard personal allowance, may have a band of pay on which they’re suffering deductions of 40% tax, 12% NICs, 9% plan type 1 or 2 loan and 9% plan type 3 loan – a total of 70%. I wonder how this is supposed to encourage people to undertake postgraduate studies.
A few years ago, the government said it planned to extend eligibility for shared parental leave and pay to include the grandparents of the child. Since then, there has been a long period of silence on the topic of an implementation date. We’ve now been told that this won’t happen until 2020 at the earliest, as the government is examining various options to help parents of young children. Let’s hope the other options under consideration don’t impact on payroll too much.
We may also have a new type of statutory leave and pay in the medium-term. The Parental Bereavement (Leave and Pay) Bill is currently before Parliament and seems likely to become law as there is cross-party consensus for it. However, the details would have to be worked out after the Bill became law, including the implementation date. A lot of work would be required, and it will probably be several years before we need to deal with this.
And then, there’s Brexit. Negotiations on this seem to be an ebb-and-flow process, and this is likely to continue. Whatever the final arrangements are, we will need to deal with them. From a payroll perspective there may not be a lot of short-term impact, since pay and personal taxes aren’t particularly driven by European Union (EU) policy. Our human resources colleagues may have more to concern themselves with, since much of our current employment law is EU-inspired. However, the impact on them will be reduced if the government makes good on its promise to initially embed existing EU rules and regulations into UK law. But it really is a ‘wait and see’ situation because it’s likely the civil servants and politicians will be working on details right up to the deadline in 2019.