The new Tax Year comes into effect from 6 April 2018 and there are three main changes happening that will affect employees and employers.
1. The Tax Free Allowance will rise to £11,850 (£228 gross per week)
The personal allowance – the amount people earn before they start paying income Tax – will rise from £11,500 to £11,850.
This means that employees on a gross salary agreement will see an increase in their take-home pay (net) and employers will see a decrease in their HMRC bill.
2. The National Insurance threshold will rise to £8,424 (£162 gross per week)
Both employers and employees National Insurance thresholds will be increasing from £8,112 to £8,424.
The same as with the Tax Free Allowance, this means that employees on a gross salary agreement will see an increase in their take-home pay. Employees on net agreement will not have any change to their take-home pay. Employers will see a slight decrease in their HMRC bill.
3. Pension contributions are increasing to a total of 5%
Both the employer and employee can choose to contribute more than the minimum if they wish, but it is the employers responsibility to ensure the pension scheme is a qualifying scheme, and contributions are deducted correctly.To save money, the percentage contribution can be paid on something called 'Qualifying Earnings'. Using Qualifying Earnings means that you only pay a pension contribution on part of the gross salary, rather than the whole salary, therefore reducing the amount to pay.
|Present until 5th April||1%||0.8%||0.2%||2%|
|6th April 2018 - 5th April 2019||2%||2.4%||0.6%||5%|
|6th April 2019 - onwards||3%||4%||1%||8%|
Check the payslips before paying your nanny
We recommend that all employers check their employee’s payslips for the new net salary and change any Standing Order accordingly. If you have any questions you can always contact us.
For more information about the new rates and thresholds please click here.