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News: 2. Auto Enrolement
There has been a sharp rise in warning letters and fines being handed out to employers for failing to comply with their new workplace pension duties, recorded by the Pensions Regulator. The increase comes as thousands of small and micro employers, some just employing one or two people, are being brought on board the Government’s flagship automatic enrolment scheme to encourage workplace pension saving.
A total of 4,818 compliance notices have been issued to firms since auto enrolment started in autumn 2012 - but more than half of these, at 2,596, were issued between October and December 2015 alone. The notices contain deadlines which firms need to meet, or they risk getting a fixed £400 fine.
News: 3. Employment Allowance
If you are an eligible employer, you can reduce the amount of employer National Insurance contributions (NICs) you pay by up to £2,000 a year through the Employment Allowance. From April 2016 the maximum value of the allowance will rise to £3,000 a year. This means that your employer National Insurance contributions could be reduced by a further £1,000 a year.
If you already claim the allowance and continue to be eligible to claim, your claim will be ongoing and you just need to continue making the appropriate deductions.
If you are unsure if you have been claiming correctly, contact us today and we can help you make sure you claim this free pay from HMRC.
News: 4. National Minimum Wage
More than 490 employers who have failed to pay their workers the National Minimum Wage have been named and shamed, since the scheme was introduced in October 2013, with total arrears of over £3,000,000 and total penalties of over £1,100,000.
The rates below apply from 1 April 2016 and are likely to change again on 1 October 2016.
News: 5. Landlords
From April 2017 small buy-to-let investors will be hit by gradual tax changes set to slash their profits and increase their tax bill.
From April next year the Treasury will start phasing in changes which will eventually see landlords pay tax on the entire rental income they generate from their properties.
They will not be able to deduct the cost of mortgage interest. Instead, they will benefit from a tax credit equal to 20pc of the interest cost. It will mean higher-rate and additional-rate taxpayers will pay considerably more tax - and in some cases even pay tax where they make no profit.
Some current basic-rate taxpayers will also be hit, because the change will push them into the higher-rate tax bracket.
But landlords structured as companies are exempt, and will continue to pay corporation tax on their profits.
Setting up a Limited Company may look a really attractive proposition at the moment, but they only work for certain types of investors, and people have to be aware of the implications further down the line.
Buying a buy-to-let property through a company is a similar process to buying it as an individual. But be aware that the 3% extra stamp duty levied on people buying second properties from April 2016 will also apply to people buying through a company.
If you’re already a buy-to-let owner, transferring property into a company has its own tax implications. The property has to be sold at market value. This has capital gains tax implications as well as potential stamp duty costs when the property is bought through the company.
If the property has increased in value since it was bought, capital gains tax may be payable on the sale, though after a landmark case in 2013 landlords may be exempt from this if they can show that the property is a "business" as opposed to an "investment".
This depends on the amount of work the landlord does on the property, including day-to-day maintenance and direct management of tenants. If they have another job or employ a letting agent to do the work, it’s likely to be categorised as an investment as opposed to a business.
Category of worker
Aged 25 and above (national living wage rate)
Aged 21 to 24 inclusive
Aged 18 to 20 inclusive
Aged under 18 (but above compulsory school leaving age)
Apprentices aged under 19
Apprentices aged 19 and over, but in 1st year of their apprenticeship
News: 1. Holiday Pay
Workers in the UK are entitled to 28 days a year paid holiday (which can include Public Holidays), if they work full time for five days a week. Part-time workers are entitled to the same level of holiday pro rata. Self-employed workers are not entitled to any annual leave. If you leave your job with holiday leave still yet to use, your employer should pay this back to you.
Holiday Pay Calculation
Up until recently, the UK government has advised that employers use basic pay when calculating how much a worker should receive whilst they are on holiday. This means that, historically, commission and overtime have not been included when calculating holiday pay.
However, on 12 June 2016, a new ruling on holiday pay came into force, with new guidelines relating to overtime and commission. Employees who work in sales roles and earn a commission based salary are most affected by this, and also set to gain now these new guidelines are in place.
The guidelines for overtime indicate that employers should include normal non-guaranteed overtime when calculating holiday pay. Whilst not contractually agreed, this overtime would include any case in which the employee is obliged to work if it is offered or required by the employer. To calcultate the payment the Employer shouldo consider the three previous months of earnings and calculate an average to use for holiday pay.
It has been stated that employers should now also include commission payments when calculating holiday entitlement for employees whose pay is commission based. However, the guideline in terms of calculating it is less clear. Generally, it is advisable that employers should adopt a similar method for commission as they do for overtime, that is, to consider the three previous months of earnings and calculate an average to use for holiday pay. However, one difficulty lies in the fact that commission schemes vary considerably and will therefore complicate how holiday rates will be calculated.
Although the case for commission has been made, there have been no clear guidelines in relation to other rewards, such as discretionary bonuses. The case for whether or not bonuses should be considered when calculating holiday pay is yet to be considered and it will remain for national courts and tribunals in the future to decide.
Understandably, many employers are concerned as to how far back claims for overtime may be allowed. Although not legally binding, the guidelines state that any claim made for underpayment of overtime should not exceed a three month period. Therefore, employers should review the 12 weeks of employment immediately preceding the holiday period and work out an average amount of overtime pay to be included in any holiday pay.
What Should Employers Do Now?
Technically, now the ruling has been made, employers should immediately begin to factor in overtime and commission into holiday pay, using the guidelines provided. On a practical level, employers and HR departments should be communicating with payroll providers and determining whether current payroll systems are able to process this update in calculations. Workers contracts and handbooks should also be updated clarifying any changes.
Clearly, one of the biggest challenges facing businesses is any potential claims made by employees in terms of remuneration for lost holiday pay. Therefore, it may be beneficial for employers to calculate the maximum liability for all employees in order to be best prepared for any financial loss incurred as a result.