Pensions Auto Enrolment

The Department for Work and Pensions has confirmed the thresholds for pensions automatic enrolment for 2017/18.

The main qualifying threshold or ‘trigger’ for employees to be automatically enrolled will be maintained at £10,000 per annum. The lower limit of the qualifying earning band and will be £5,876 and the upper limit £45,000.

The written statement also includes:

‘Automatic enrolment has been a great success to date with almost 7 million people enrolled by more than 293,000 employers. It will give around 11 million people the opportunity to save into a workplace pension and we expect this to lead to around 10 million people newly saving or saving more by 2018, generating around £17 billion a year more in workplace pension saving by 2019/20.’

With over a million micro (1 – 4 employees) and small (5 – 49 employees) employers reaching their staging date for auto enrolment in the last quarter of 2016/17 and throughout 2017/18 it is important to ensure employers comply with their obligations. The Pensions Regulator has confirmed the exceptions which apply to employers which can be found at on their website (see the TPR link below).

Please contact us if you would like help with auto enrolment compliance or to determine whether or not your business is exempt from auto enrolment.

Internet links: Parliament written statement TPR exemptions

Tax cheats – HMRC’s criminal case highlights of 2016

HMRC have revealed their top ten most significant fraud and organised crime cases of the last year.

Simon York, Director of HMRC’s Fraud Investigation Service, said:

‘Day in, day out, HMRC is coming down hard on tax cheats. As these cases show, we’ll tackle anyone committing tax fraud, regardless of how well resourced, well advised, or well organised. These ten prosecutions are among the most significant cases we’ve handled this year, and they reflect the wide range of work carried out by HMRC.’

Internet link: GOV.UK news

More silly taxpayer excuses from HMRC

HMRC have released more unusual excuses from taxpayers who failed to complete their self assessment tax return on time. These include:

  1. ‘My tax return was on my yacht…which caught fire’
  2. ‘A wasp in my car caused me to have an accident and my tax return, which was inside, was destroyed’
  3. ‘My wife helps me with my tax return, but she had a headache for ten days’
  4. ‘My dog ate my tax return…and all of the reminders’
  5. ‘I couldn’t complete my tax return, because my husband left me and took our accountant with him. I am currently trying to find a new accountant’
  6. ‘My child scribbled all over the tax return, so I wasn’t able to send it back’
  7. ‘I work for myself, but a colleague borrowed my tax return to photocopy it and lost it’
  8. ‘My husband told me the deadline was the 31 March’
  9. ‘My internet connection failed’
  10. ‘The postman doesn’t deliver to my house’

With the self assessment submission deadline of 31 January now past and an automatic penalty of £100 for failing to submit your return on time, please contact us if you need help bringing your affairs up to date.

Internet link: GOV.UK news

Landlords to receive less tax relief on interest

In a change that will impact residential landlords, the amount of income tax relief available on residential property finance costs will be restricted to the basic rate of income tax. This change will mean that landlords will no longer be able to deduct all of their finance costs from their property income. They will instead receive a basic rate reduction from their income tax liability for their finance costs.

The restriction in the relief will be phased in over a four year period as follows:

  • in 2017/18, the deduction from property income will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction;
  • in 2018/19, 50% finance costs deduction and 50% given as a basic rate tax reduction;
  • in 2019/20, 25% finance costs deduction and 75% given as a basic rate tax reduction;
  • from 2020/21, all financing costs incurred by a landlord will be given as a basic rate tax reduction.

These rules do not apply to residential properties held in companies

In addition rules may further restrict the relief which is due where the individual’s property income or total income is less than the amount on which basic rate relief is due. The computation is complex so please do get in touch if you would like us to review your position.

Internet link: GOV.UK guidance

Pay the NMW – no excuses

The government has revealed ten of the most bizarre excuses used by unscrupulous business owners who have been found to have underpaid workers the NMW.

These employers used excuses such as ‘only wanting to pay staff when there are customers to serve and believing it was acceptable to underpay workers until they had ‘proved’ themselves’.

The government has launched an awareness campaign to encourage workers to check their pay to ensure they are receiving at least the statutory minimum ahead of the NMW and NLW increases on 1 April 2017.

Employers need to ensure they are paying their employees at least the NMW and NLW.

Rate from 1 October 2016 Rate from 1 April 2017
NLW for workers aged 25 and over (introduced and applies from 1 April 2016) £7.20 £7.50
the main rate for workers aged 21-24 £6.95 £7.05
the 18-20 rate £5.55 £5.60
the 16-17 rate for workers above school leaving age but under 18 £4.00 £4.05
the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship £3.40 £3.50

This will be the second increase in six months for the NMW rates. Going forward the NMW and NLW rates will both be reviewed annually in April.

In a recent article in the Employer Bulletin, HMRC cite common errors:s

  • not paying the right rate, perhaps missing an employee’s birthday,
  • making deductions from wages which reduce the employee’s pay below the NMW/NLW rate,
  • including top ups to pay that do not qualify for NMW/NLW,
  • failure to classify workers correctly, so treating them as interns volunteers or self employed and
  • failure to include all the time a worker is working, for example time spent shutting up shop or waiting to clear security.

What are the penalties for non-compliance?

The penalties imposed on employers that are in breach of the minimum wage legislation are 200% of arrears owed to workers. The maximum penalty is £20,000 per worker. The penalty is reduced by 50% if the unpaid wages and the penalty are paid within 14 days. HMRC also name and shame employers who are penalised.

If you would like help with payroll issues please contact us.

Internet link: GOV.UK NMW news

Last chance to top up your pension

From October 2015 the government is offering some people a limited opportunity to top up their state pension. Who does the offer apply to and is it worth going for?

State pension and NI contributions

As you know, the amount of basic state pension depends on how many full years of NI contributions you have paid by the time you reach state pension age (SPA). From 6 April 2016 the number of years needed to qualify for the full pension jumps from 30 to 35.

Trap. Anyone who reaches SPA before 6 April 2015 and doesn’t have 35 years’ NI contributions won’t receive the full pension and can’t add to their NI record through the usual method, i.e. by paying contributions from earnings. This is where voluntary contributions can come into play.

Class 3A contributions

The government realised that some people would lose out unfairly because of the new 35 year rule and so is offering them a one-off chance to pay to top up their state pension. If you reach state pension age before 6 April 2016 (even if that’s not you keep reading for other options) you can add to your qualifying NI years, and so improve your state pension, by paying Class 3A contributions.

The main terms and conditions are:

  • contributions are payable as a single lump sum that must be paid by 5 April 2017
  • the cost varies depending on your age, gender and the number of extra NI contribution years you want to buy (see below)
  • the extra state pension will be payable for life
  • if you die having paid Class 3A NI and your spouse survives, they will be entitled to receive at least 50% of the extra pension for the remainder of their life.

How much?

The maximum extra pension you can buy is £1,300 per year, but you can choose to buy as little as £52 per year. Naturally the cost is different, but to give you some idea, a woman reaching SPA on 1 April 2016 who wants to buy £520 per year of extra pension would have to pay £9,000 Class 3A NI by 5 April 2017.

Tip 1. GOV.UK has a handy calculator for checking the cost of extra state pension (see The next step ).

Tip 2. Before paying Class 3A contributions check if you’re allowed to pay Class 3 contributions instead (see The next step ). These can be cheaper than Class 3A, but you receive the same amount of extra state pension.

Class 3 contributions

Class 3 contributions can be paid by anyone with gaps in their NI record in the last six years even if you’ve already reached your SPA. The cost varies, but you can expect to pay around £700 for each top-up year, which at current pension rates buys you about £200 per year if your SPA is before 6 April 2016 and £230 if it’s later.

Tip. Gaps in your NI record can occur for many reasons, e.g. you were working abroad or unemployed and not claiming benefits. Whatever the reason you can find out by asking HMRC (see The next step ).

The offer applies if you will reach state pension age before 6 April 2016 and have gaps in your NI contributions record meaning that you don’t qualify for the full state pension. You can check with HMRC for gaps in your record and if so buy Class 3A contributions which can give you extra pension of up to £1,300 per year.

Auto enrolment ‘engagement’

TPR has also issued the third edition of ‘Automatic enrolment: Commentary and analysis’, which reports on the impact of automatic enrolment and the increasing participation in workplace pension schemes. The commentary states:

  • By March 2015, over 5.2 million workers had been successfully automatically enrolled since the reforms began in 2012, an increase of more than 2.2 million workers from 2014, and 4.2 million from 2013.
  • Automatic enrolment is helping to turn around the decade-long decline in pension provision, with 59% of all employees now active members of a pension scheme, compared with just 47% in 2012. This increase suggests that pension saving is now becoming the norm.
  • The pensions landscape has been transformed as the majority of people are enrolled into defined contribution schemes. We have witnessed the growth in master trusts – 94% of employers who chose a trust-based scheme opted for a master trust.
  • We now expect that significantly more employers will be subject to automatic enrolment duties than originally anticipated, mainly due to an increase in the number of new companies that have started up, and fewer going out of business than was forecast. We have revised the staging profile accordingly, so that it reflects the 1.8 million employers we expect to help through the automatic enrolment process from now until 2018.

If you would like help with your payroll or advice on Pensions Auto Enrolment please contact us.

Internet links: Commentary