|
The Chancellor presented his Pre-Budget Statement to Parliament on 5 December 2005. 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 2006 by 2.7% (i.e. the year-on-year increase at September 2005).
There were also announcements on a number of other measures, including:
analysis of proposal to transfer payment of SMP etc to HMRC
further tax avoidance measures and extension of the disclosure regime
incentives for taking Euro V compliant cars.
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 2006/07. The NICs thresholds for 2006/07, effective 6 April 2006, are as follows:
|
| Weekly
| Monthly
| Yearly
|
| Lower Earnings Limit (LEL)
| £;84
| £;364
| £;4,368
|
| Earnings Threshold (ET)
| £;97
| £;420
| £;5,035
|
| Upper Earnings Limit (UEL)
| £;645
| £;2,795
| £;33,540
| |
Tax Allowances
Changes to bandwidths and any changes to income tax rates will be announced in the Budget Statement in March/April 2006. The new tax allowances from 6 April 2006 are shown in the following table. The increases are in line with inflation.
|
| 2005/06
| Change
| 2006/07
|
| Personal allowance (age under 65)
| £;4,895
| + £;140
| £;5,035
|
| Personal allowance (age 65-74)
| £;7,090
| + £;190
| £;7,280
|
| Personal allowance (age 75 and over)
| £;7,220
| + £;200
| £;7,420
|
| Blind Person's Allowance
| £;1,610
| + £;50
| £;1,660
|
| Married couple's allowance (age less than 75 and born before 6th April 1935)
| £;5,905
| + £;160
| £;6,065
|
| Married couple's allowance (age 75 and over)
| £;5,975
| + £;160
| £;6,135
|
| Married couple's allowance - minimum amount
| £;2,280
| + £;70
| £;2,350
|
| Income limit for age-related allowances
| £;19,500
| + £;600
| £;20,100
| |
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 2006 will be 503L and the weekly tax threshold will be £;97. The change to L suffix tax codes will be made in bulk from the start of the 2006/07 tax year. Instructions will be provided on form P9X, to be included in the Employer's Annual Pack due in February 2006. The update will involve an increase in 14 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 2006. 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 2006. Based on practice in recent years, the date may be 18 May, i.e. week 7, or 15 June, i.e. week 11.
As the tax code for most employees will exceed 500 from April 2006, it is to be expected that Pay Adjustment Tables A with a new layout will be provided in the Employer's Annual Pack.
The existing taxable pay tables SR + B to D (dated May 2004) will continue to be used until the week in 2006/07 when the Budget changes are applied. New tables are supplied with the Budget Pack.
Statutory Sick Pay
The weekly rate of SSP will increase from £;68.20 to £;70.05 from 6 April 2006. 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 £;84 per week from 6 April 2006.
Statutory Maternity, Paternity and Adoption Pay
The changes to the rates, percentages and thresholds for SMP, SPP and SAP, effective for payment weeks starting on or after 2 April 2006, are as follows:
|
| 2005/06
| 2006/07
|
| SMP weekly rate for first 6 weeks
| 90% of average weekly earnings, even if less than £;106.00
| 90% of average weekly earnings, even if less than £;108.85
|
SMP weekly rate for up to next 20 weeks
SPP weekly rate for up to 2 weeks
SAP weekly rate for up to 26 weeks
| lower of £;106.00 and
90% of weekly earnings
| lower of £;108.85 and
90% of weekly earnings
|
| Percentage of payment recoverable
| 92%
| 92%
|
| Percentage of payment recoverable under Small Employer's Relief
| 100%
| 100%
|
| Percentage of NI compensation recoverable under Small Employer's Relief
| 4½%
| 4½%
|
| Annual NICs threshold for Small Employer's Relief
| £;45,000
| £;45,000
| |
The Lower Earnings Limit, the level at which an employee's average earnings must reach to qualify for SMP, SPP or SAP, increases to £;84 per week from 6 April 2006.
...back to 8 December 2005
Sources:
Pre-Budget Report 2005
Income tax allowances, National Insurance Contributions etc |
For Payroll and Human Resource Professionals
