Pre-Budget Statement

The Chancellor presented his Pre-Budget Statement to Parliament on 10 December 2003. Most of the matters relevant to Payroll and HR were set out in supporting documents and press releases issued at the time. As UK legislation requires the PAYE, NICs and related thresholds to rise each year in line with the Retail Price Index, most are set to increase from 6 April 2004 by 2.8% (i.e. the year-on-year increase at September 2003). In a few cases, the increases are higher and legislation will be required to give them effect.

There were also announcements on a number of measures that have been the subject of consultation in recent months. These are covered in separate items in this newsletter.

The Pre-Budget Statement and the associated documents are available on the Treasury and Inland Revenue websites.

National Insurance Thresholds

There are no increases to NICs rate for 2004/05. The NICs thresholds for 2004/05, effective 6 April 2004, are as follows:

Tax Allowances

Changes to income tax rates and bandwidths will be announced in the Budget Statement in March/April 2004. The new tax allowances from 6 April 2004 are shown in the following table. The increases are in line with inflation other than the age-related personal allowances, where the increases are around 3.3%.

The personal allowance for employees under age 65 is set at the same level as the NICs earnings threshold. The new emergency tax code from April 2004 will be 474L and the weekly tax threshold will be £;91. The change to L suffix tax codes will be made in bulk from the start of the 2004/05 tax year. Instructions will be provided on form P9X, to be included in the Employer's Annual Pack due in February 2004. The update will involve an increase in 13 points to all L tax codes.

Any changes to the rates and thresholds will be announced by the Chancellor in the Budget Statement in March/April 2004. Instructions on how to implement any changes will be provided in the Employer's Budget Pack, sent out subsequent to the Budget, and will be applied on the first payday on or after a date in May or June 2004. Based on practice in recent years, the date may be 18 May, i.e. week 7, or 15 June, i.e. week 11.

The existing taxable pay tables SR + B to D (dated June 2003) will continue to be used until the week in 2004/05 when the Budget changes are applied. New tables are supplied with the Budget Pack.

Tax Credits

The elements of Working Tax Credit and Child Tax Credit will increase in line with inflation from April 2004, except for the child element of CTC which increases by £;180 instead of £;50. The increases to the elements of WTC, effective April 2004, are as follows:

Statutory Sick Pay

The weekly rate of SSP will increase from £;64.35 to £;66.15 from 6 April 2004. Daily rates are calculated by dividing the rate by the number of qualifying days in the week. The Lower Earnings Limit, the level at which an employee's average earnings must reach to qualify for SSP, increases to £;79 per week from 6 April 2004.

Statutory Maternity, Paternity and Adoption Pay

The changes to the rates, percentages and thresholds for SMP, SPP and SAP are as follows:

The increase in the NICs annual threshold for the Small Employer's Relief scheme means that employers who are making payments of SMP, SPP or SAP that overlap 6 April 2005 will be able to reclaim the higher percentage for payments made after that date if their total Class 1 NICs in the qualifying year are not more than £;45,000. The qualifying year is the tax year preceding the tax year in which the employee's qualifying week or matching week falls.

The Lower Earnings Limit, the level at which an employee's average earnings must reach to qualify for SMP, SPP or SAP, increases to £;79 per week from 6 April 2004.

Construction Industry Scheme

The extensive changes to the Construction Industry Scheme planned for April 2005 have been postponed until April 2006 in order to provide sufficient time for the industry to prepare and, presumably, for the Inland Revenue's supporting computer systems to be developed.

Subscriptions and professional fees

The tax relief rules for subscriptions and professional fees are under review, with a view to targeting the relief on organisations that provide workplace development. See separate news item.

Employer-provided childcare

The Government has confirmed its intentions to extend the tax and NICs relief to all forms of employer-provided childcare from April 2005. See separate news item.

Taxation of pensions

A second consultation paper has been published, setting out the Government's revised proposals for radical simplification of the taxation of pensions. Note, however, that there are no direct implications for PAYE. See separate news item.
Sources: www.inlandrevenue.gov.uk/pbr2003/index.htm
www.hm-treasury.gov.uk/pre_budget_report...
prebudget2003.treasury.gov.uk
...back to 12 December 2003

Pre-Budget Report

The Chancellor has announced that he will present his "November" Pre-Budget Report to Parliament on 10 December. Details of changes to NICs rates and thresholds are always announced at this time so they can be introduced from 6 April next.
...back to 21 November 2003