Changes to Payroll Legislation for 2020/21

Changes to Payroll Legislation for 2020/21

The new tax year is just around the corner so now is a good time to start considering any changes that need to be made to your payroll from 6 April 2020. The main changes to legislation for the 2020/21 tax year affect Employment Allowance, National Minimum and Living Wage rates and the calculation of Holiday Pay.

Changes to Employment Allowance (EA)

EA was introduced in April 2014 and allowed eligible employers to save up to £2,000 from their Employer National Insurance Contributions (ERNIC) each tax year. This allowance was increased to £3,000 from April 2016.

The criteria for claiming the allowance is changing from April 2020. Employers will only be eligible for relief if their total ERNIC bill for the 2019/20 tax year is below £100,000. In the case of connected companies, the total bill for all companies must be below £100,000.

From April 2020, eligibility will need to be checked and claimed on an ongoing basis.

Changes to National Minimum & Living Wage Rates

The rates are set to increase again this year for both National Minimum and Living Wage rates, with the increase of 6.2% for the National Living Wage being the largest annual increase on record.

It is likely that there will also be changes to rates for statutory payments including Statutory Sick Pay, Statutory Maternity Pay, Statutory Paternity Pay, Statutory Adoption Pay and Shared Parental Pay. These rates will be available from HM Revenue & Customs nearer to the start of the new tax year.

Holiday Pay Calculations

From April 2020 the calculation of holiday pay for employees with an irregular working pattern is changing to better reflect varying hours worked over an extended period. The current calculation is not reflective of hours worked over the course of the year, so the calculation will now be based on 52 weeks rather than 12 weeks prior to the holiday being paid.

We can help with any queries or concerns you may have regarding these changes; if you wish to discuss the points above in more details please contact Sadie Leadbetter –