National Minimum Wage Rates (NMW)
From 1 October 2011 the national minimum wage rates will change, there are currently four bands (as stated below). Apprentice rates are for the under 19 or 19 and in the first year of their apprenticeship, if over 19 and have completed the first year of the apprenticeship then normal NMW rates apply.
- The adult rate (21 years and older) will increase by 15p to £6.08 an hour (Currently £5.93)
- The rate for 18-20 year olds will increase by 6p to £4.98 an hour (Currently £4.92)
- The rate for 16-17 year olds will increase by 4p to £3.68 an hour (Currently £3.64)
- The rate for apprentices will increase by 10p to £2.60 an hour (Currently £2.50)
PAYE underpayments and repayments
- What has happened?
HMRC carries out an ‘End of Year Reconciliation' process in which the amount of tax and national insurance deducted by the employer is checked against the information held on its records.
In June 2009 a new IT system was introduced which, as it now holds all the employee information in one place, makes it easier to see incorrect payment of tax. HMRC stated that this had "brought to light discrepancies... and this is resulting in a number of incorrect [PAYE coding] notices being issued".
This same system is now being used to do the reconciliation process for the tax years 2008-09 and 2009-10 - resulting in these new underpayment and overpayment calculations.
As the same system is now being used to do the reconciliation process for the tax years 2008-09 and 2009-10, new underpayment and overpayment calculations are coming to light.
- Which employees are affected?
Some 45,000 people are thought to be affected and include those who have failed to inform the HMRC about changes to their circumstances such as new employment or receiving new benefits may have paid the wrong amount of tax and those whose employers may also have used a wrong tax code when processing their pay.
- How will employees know if they are affected?
Employees affected will be informed by letter. HMRC said, "Most people have paid the right amount of tax so won't get a letter from us with a revised tax calculation. So don't worry if you don't receive a letter (and there is no need to contact us if you haven't received one)."
How will the unpaid tax be recovered?
Employees owing less than £2,000 won't get a bill - instead their tax code will be changed from April 2011. Effectively, they will pay it back in instalments deducted from your salary during the 2010/2012 tax year.
Employees, owing more than £2,000, must repay the amount in a lump sum.
- Do employees have to pay up?
Some experts said people facing an unexpected tax demand may be able to refuse to pay up as HMRC could have exceeded its own time limits in which to ask for the money.
The Low Incomes Tax Reform Group stated ‘Any calculations produced by HMRC which result in an underpayment of tax should be treated with caution. It will be by no means certain that they will be correct or should be agreed.'
It is urging recipients to "check and challenge" them.
"The underpayment may have arisen because HMRC have failed to make timely use of information about you which they have had in their possession," said the group. In such cases, individuals have the right to ask for the unpaid tax to be written off through what is known as an "Extra Statutory Concession" or ESC A19.
The rules state that if Revenue & Customs was provided with all the necessary information needed to correctly attribute a tax code, it should have used this within 12 months of the end of the tax year in which it was received to claw back the full amount of money. As a result, individuals cannot normally use ESC A19 to ask for tax owing for 2009/10 to be written off, but a group spokesman said: "If HMRC have persistently got something wrong year after year, we would expect them to write the tax off for all years up to and including 2009/10."
- Is help available?
The Low Incomes Tax Reform Group was one of the first to produce sample letters that those affected can tailor to their own situation and send off to HMRC in an attempt to get the underpayments waived. Its guide, including the template letters, is available from the LITRG website via the link: http://tinyurl.com/taxletters
• What if an employee cannot afford to pay back the money?
HMRC advises people who genuinely cannot afford to pay the tax to contact it to see if it can come to some arrangement with them. It may be that they can pay some now and some in the future. This will be done on a case by case basis.
- What about refunds?
Around 4.3 million people have paid too much tax, and are due average refunds of £420. If you are one of them, a "payable order" (essentially a cheque) should be sent to you within five to 14 days of receiving the letter.
Check your coding notices
A system problem at HMRC has caused many tax codes to be incorrect. You may need to ask employees to check their codes and query any discrepancies.
HMRC has identified three common errors:
- A previous employment stopped some time ago but a coding notice is nevertheless sent for that employment which will deny the taxpayer those allowances against their current earnings until the mistake is corrected.
Two notices have been sent for the same employment (eg where the employee has two payroll records that HMRC cannot differentiate)
Code BR or D0 is issued for a continuing employment or pension
A helpline number of 0845 3000 627 has been issued for employees affected.
New in year penalties for late PAYE
From the start of this tax year late PAYE payments to HMRC will now incur sanctions for smaller businesses.
If you are now late with your PAYE and NIC's remittances the tax geared penalties are as follows:
• 1% (2,3 or 4 defaults)
• 2% (5,6 or 7 defaults)
• 3% (8,9 or10 defaults)
• 4% for the 11th and 12th defaults.
If any payment is later than six months, a 5% surcharge will apply. A further 5% will apply if the payment later than twelve months.
Please be aware that no warning letters are planned and it is possible that an employer could be unaware of the problem until after the end of the tax year, by which time a significant penalty may have been built up unwittingly.
Changes in state pension age
From 6 April 2020 the state pension age for women will be 65, the same as for men. Women born between 6 April 1950 and 5 April 1955 will see their state pension age increased. From 2010 women's state pension age will be gradually increased to bring it up to age 65 by 2020.
A woman born before 6 April 1950 reaches state pension age at 60. A woman born between 6 April 1950 and 5 April 1955 reaches state pension age on a given day between 6 May 2010 and 6 March 2020 as set out in the 1995 Pensions Act. A woman born after 5 April 1955 reaches state pension age at 65.
Employers will therefore need to establish the exact state pension age of women who choose to work after their sixtieth birthday since the employees' class 1 primary NICs will cease at that age. Employer's contributions remain due whatever the age of the employee, but switch to table C at the new state pension age.
