Make the most of the new tax year

With the end of the tax year upon us, it provides the perfect opportunity to assess the financial market and make changes to suit the current climate. For your business to function effectively, you need to make the most of all your financial services, including your payroll and salaries, as well as fully understanding how your taxes operate.

At KMS Payroll, we’re here to help you do exactly that, and in this article we’re going to detail a number of important elements that will help you to improve your current abilities.

Understanding the National Minimum Wage and National Living Wage

Firstly, let’s clarify the difference between these – the National Minimum Wage (NMW) is the pay per hour that most workers aged under 25 are entitled to by law, whereas the National Living Wage (NLW) is the minimum pay per hour that the majority of workers over 25 are entitled to by law.

The Living Wage is also set independently by the Living Wage Foundation and is calculated according to the standard cost of living in the UK – employers can choose to pay this on a voluntary basis.

In April 2018, these rates are set to increase to the following:

  • 25 and over - £7.83 per hour
  • 21 to 24 - £7.38 per hour
  • 18 to 20 - £5.90 per hour
  • Under 18 - £4.20 per hour
  • Apprentice - £3.70 per hour

In terms of this rate of pay for apprentices, it only applies to those aged under 19, or 19 or over who are in their first year of the qualification.

It’s important to understand what you need to pay your employees as it’s against the law to pay workers less than the National Minimum Wage and the National Living Wage, or to falsify your payment records.

New rates and thresholds for employers

Not only are the National Minimum Wage thresholds increasing in April, so are the tax rates that apply to your business. As part of the forthcoming tax year, there is going to be an increase in the amount of Income Tax you will need to deduct from your employees, which is relative to their tax code and how much of their income is taxable above their Personal Allowance.

From 6th April, the employee personal allowance will stand at:

  • £228 per week
  • £988 per month
  • £11,850 per year

The UK’s basic tax rate remains at 20% on annual earnings above the PAYE tax threshold, but the upper bracket for this category has increased to £34,500. The higher and additional rates will also remain at 40% and 45% respectively.

Alongside this, there will also be changes to emergency tax codes that you will need to be aware of.

Make sure you’re prepared for these changes so you aren’t caught out when they come into play. If you’d like any support in getting your head around them, please do not hesitate to get in touch. At KMS Payroll, we’re dedicated to giving you the best solution possible for your business.