Budget 2021 and Tax Year End – what does this mean for domestic employers?
From extending support for employees affected by coronavirus (COVID-19) to freezing income tax thresholds, the government has unveiled a series of changes. As we approach tax year end, here’s a quick recap on the Chancellors Budget 2021 announcements and how these may affect those who employ their own household staff.
Furlough Scheme Extension
The Chancellor announced an extension of the furlough scheme (CJRS
) until the end of September. This extension could now open up furlough, rather than redundancy, as an additional option for employers over the next six months.
Employers will have the option of full-time furloughing and flexible furloughing.
Under the extended scheme, your employee would continue to receive 80% of your salary for the hours they can’t work, up to £2,500 a month.
However from July 2021 employers will be required to contribute towards the cost of the unworked hours. Please see the breakdown below:
• Government to pay 70% and employer to pay 10% in July
• Government to pay 60% and employer to pay 20% in the August & September
Can I use the Extended Furlough Scheme to continue to claim for my staff?
If you are planning to continue furloughing your employee(s) from 1st May 2021 onwards, you will be able to claim your employee’s wages through the Furlough Scheme (CJRS) as long as your employee was on your PAYE payroll on 2 March 2021.
This means you must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 2 March 2021, notifying us of earnings for that nanny.
National Minimum Wage and National Living Wage
The Chancellor announced a 2.2% rise in the National Minimum Wage (NMW) from £8.72 to £8.91. The National Living Wage (NLW) age has also been reduced from 25 and above to 23 and above. As a nanny employer you have a legal obligation to be compliant with this.
Accommodation Offset Rates - what this means for Live-in Household Staff
Accommodation offset is a figure set by the government as a limit to the amount that can be considered as a value of provision of accommodation by an employer for an employee, that counts towards the national minimum wage.
If your staff are living with you and you are operating in line with the accommodation allowance, again you must ensure your staff are paid in line with the latest National Minimum Wage or above.
The personal tax-free allowance will be changing to £12,570 per year. This means the standard tax code will change to 1257L.
As part of his budget announcements, the Chancellor did not increase income tax, National Insurance contributions and has frozen the thresholds at which employees start paying 20% income tax and at which they pay the higher rate of 40%.
These thresholds will rise to £12,570 for the 20% band and £50,270 for the 40% band in April as planned. They will then remain at that level for five years (until 2026), even if inflation helps to boost wages.
Will this affect my employee’s salary?
If you have agreed a gross salary with your employees, these changes will affect the employee’s net pay.
If you have a net agreement in place with your employee, the net salary will not change.
How can Stafftax help?
Employing household staff and want to ensure your payroll and legal obligations are in line with the latest legislation? Discover our complete end-to-end domestic payroll and HR service
today. We deal with HMRC on your behalf, run payslips, offer unlimited HR support and more.
Stafftax customers - if you have any queries regarding the above announcements we have emailed your annual Tax Year End leaflet containing a full explanation of updates and how to action any changes such as salary increases, benefits in kind (if due) and general payslips amendments.