Which changes can be expected for the new tax year?

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So, it's nearly that time of the year again... yep, you guessed it! The end and start of the tax year are just around the corner. 

Twelve months ago, everything seemed relatively normal — a tax year was ending and a new one was starting. Nothing too out of the ordinary. 

Yes, a few things were a little unusual: IR35, changes to Employment Allowance and new National Minimum and National Living Wage (NMW/NLW) rates, to name a few. BUT, in the grand scheme of things, it all seemed pretty manageable. 

What has happened between then and now makes a tax year changeover seem like a relative doddle. 

The coronavirus pandemic and the changes affecting payroll have been as confusing as they have been numerous

First, furlough arrived, was extended, reduced, reduced again, ended, reintroduced, and then extended. 

Then there were all the calculations for flexible furlough and Statutory Sick Pay introduced. There was also all that time wasted preparing to introduce the Job Support Scheme, which, inevitably, never actually happened. 

So, as payroll professionals up and down the country approach the passage from one tax year to another, what are the changes they expect to see? 

We've got our very own payroll expert, Nichola Hailes, to give her perspective on what she thinks will be coming into effect.

IR35

You could be forgiven for thinking we've been here (because we have) before. 

The IR35 reforms, officially known as the Intermediaries Legislation, was a source of much contention this time last year. 

In place within the public sector, they were destined to be rolled out in the private sector in April 2020

The pandemic put a stop to that. 

The pandemic's economic impact was, correctly, deemed too severe and it was thought that businesses needed to be afforded the time to deal with the aftermath. 

All the latest on IR35

With IR35 finally due to be rolled out in the private sector, we've produced a piece outlining everything you need to know.

But as we approach the new tax year, its much-anticipated implementation is expected. 

It will likely apply to all contracts in place from 6 April 2021, meaning that payments after this date relating to a prior period do not need to have the IR35 rules applied. 

There still seems to be a little scepticism about whether businesses are prepared to deal with the upcoming changes. However, HMRC has spent a year refining the legislation and putting more resources in place to support concerned employers. 

What does Nichola think? 

"It would certainly be a surprise if IR35 didn't make it this year. A lot of work went into its implementation last year only for the pandemic to mean it was postponed. 

"Most payroll professionals anticipate it, and something quite substantial would have to happen between now and 6 April for it not to come into effect

"It is also worth noting that in the 12 months that this has been delayed, HMRC has listened to employers' concerns around their supporting resources, such as the CEST tool, and have worked on improving the support they offer employers."

NIC Relief for Veterans

NIC Relief for Veterans is a proposal that will involve removing employers' National Insurance contributions (NICs) for each new ex-Armed Forces employee for a full year. 

The idea behind it is to incentivise employers to recruit veterans and support them as they transition back to civilian life. For NIC relief, a veteran is viewed as someone who has completed at least one day of basic training in Her Majesty's regular armed forces.

The intention is to give employers secondary NIC relief, up to the value of £5,000, in the first 12 months that the veteran is employed.

Amendments have been made to the Social Security Contributions and Benefits Act 1992 coming into place between 6 April 2021 to 5 April 2024.

What does Nichola think? 

"According to the latest HMRC reports dated 11 January 2020, this will still come into effect on 6 April but will be retrospective and not managed through PAYE or RTI yet.

"Guidance on the actual process for this tax year and subsequent tax years will be published in the coming weeks."

Neonatal leave and pay

The Government has long discussed neonatal leave and pay. The consultation closed as far back as November 2019. BEIS published the Government's response to the consultation in March 2020; however, the guidance is yet to be legislated.

The legislation would support parents and families whose babies are admitted to hospital as a neonate (28 days old or less). 

Under the proposal, parents would be eligible for leave and pay if an admission lasts for a continuous period of seven or more days. 

It would be available to an employee from their first day of employment. Statutory neonatal pay would be available to those employees who have been at a company for 26 consecutive weeks and who earn more than the lower earnings limit. 

Any employers reclaiming the Government's statutory payment would do so by reducing their NICs. Large employers would also be entitled to reclaim 92%. Those that paid £45,000 or less in gross NICs in the previous tax year would be able to recover 103%

The maximum amount of statutory neonatal leave and pay available would be limited to 12 weeks.

What does Nichola think? 

"Neonatal leave and pay is a much-anticipated piece of legislation to support parents of premature babies and allow them to use their family leave later if their young baby needs to remain in hospital. 

"A resounding 99% of participants during the consultation agreed that parents of babies admitted into neonatal care should have access to additional weeks of both leave and pay.

"With the guidance not legislated, there is no chance of neonatal leave and pay being ready for 6 April 2022, let alone 2021

"Realistically, the earliest we can expect these changes to take effect will be April 2023." 

Student Loan Plan 4 

From 6 April, there will be a new student loan plan in place in Scotland. 

Under the new Plan type 04, the repayment time will reduce from 35 to 30 years, matching what already exists in England in Wales. 

This will apply to all new and existing Scottish borrowers. Existing Scottish borrowers in repayment under the Plan type 01 before 6 April 2021 will move to the Plan type 04 for the start of 2021/22 tax year

If there is a need to move employees from Plan type 01 to Plan type 04, employers will be notified under the existing SL1 notification process. 

From 6 April, any Plan type 04 Scottish borrower repayments will be calculated at 9% of earnings above the £25,000 threshold

The new plan will remain calculated, deducted and paid to HMRC under the current PAYE process. All deductions will be based on pay in which NICs are made. Rounding rules will continue under the existing Student Loans. 

What does Nichola think? 

"This is still going ahead and was one of the first confirmed changes for the start of the new tax year."

Enhanced protection against discrimination for employees who are pregnant or on maternity leave

For years and years, pregnant women and those on maternity leave have been unfairly discriminated against when it comes to redundancies. 

Typically, when a redundancy is being made, an employer should consider alternative vacancies for the affected employee. There is further protection for women who are either pregnant or on maternity leave. They receive enhanced rights to be placed, without an interview, into a vacant role if they wish.

This period begins when an employee informs their employer about her pregnancy and ends on returning from her maternity leave. 

Under the new legislation, the period covered will be extended to six months after the employee has returned from maternity leave

What does Nichola think? 

"It is widely believed that this significant piece of legislation will continue to go ahead. 

"Redundancies have been a hot topic in recent months, mainly due to the coronavirus pandemic and the vast swathes of job losses. 

"But with more attention being paid to how redundancies are handled in organisations, there is optimism that this new legislation will protect women from being unfairly discriminated against in the future." 

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