WFM UK: 2021 2022 Tax Year Updates

2021-2022 Tax Year Updates

This article has been created to give an overview of the changes that HMRC are planning on introducing in April 2021.

The exact legislative requirements have not yet been confirmed by HMRC, however, the detail below is based on draft guidance already published by HMRC in relation to the proposed changes.

IR35 – Off Payroll Workers

Off Payroll Working rules have been in place since 2000. They were designed to ensure that people who work for a Personal Service Company (PSC) who otherwise would be classed as an employee, pay the same amount of Tax and NICs as if they were employed. In April 2017, the rules changed for Public Sector Organisations, and, it was originally due to change for Private Sector Organisations from April 2020, but due to the UK Government’s Covid Response, this was delayed until April 6th 2021.

For more information about Off Payroll Working rules, please see here.

For details of the changes made to the system in regards to IR35, please see here.

Scottish Student Loans

A new Student Loan type is being introduced from 6th April 2021. This will be known as Type 04 and will be for employees who lived in Scotland and took a loan out with the Students Award Agency Scotland (SAAS) when they started the course.

For new employees, who select Type 4 on their New Starter form, the type 4 deduction should be selected during the Employee Creation process.

If an Employee does not know which type of Student Loan they have, type 01 should be selected as a default and HMRC will notify the Employer to switch to the correct one, if applicable.

Under the Scottish Student Loan Rules, an employee will pay 9% of their annual income over £25,000 from 6th April 2021.

National Insurance Holiday for Veterans

On 11th January 2020, the UK Government published details of the new legislation to give National Insurance holidays to companies that employ veterans for their first year of employment. The will introduce a Secondary Class 1 Employer NIC relief on the wages of veterans for the first 12 months of their civilian employment and will be available to employers from April 2021.

The draft legislation is available here.

The basic details of the measures are:

• The changes could provide Employers with up to £5000 relief for each qualifying veteran they employ
  
• A zero Class 1 Employers NI rate will apply up to the Upper Secondary Threshold
  
• A veteran will qualify if they have completed at least one day of basic training in Her Majesty’s regular armed forces
• Employers will be able to claim the relief for the 12 month period starting on the veteran’s first day of employment in the Veteran’s first civilian role since leaving the armed forces

For the 2021/2022 tax year, employers should pay the class 1 National Insurance contribution, as normal, and claim it back from HMRC. From April 2022, employers will be able to claim back the associated National Insurance that they would have otherwise been relieved of. Employers should keep records to demonstrate they are eligible for the relief for those periods.

More information on the claim process for 2021/2022 will be published before April 2022.

Further information about the claim can be found here.

Removal of the Earlier Year Update

Currently, any amendments that need to be made to previous tax year information is done via an 'Earlier Year' update. Details of this functionality can be found here.

The UK Government have announced that any changes required for the 2020/2021 tax year will need to be done by adjusting the year to date information on the final FPS of the tax year.

Further information on the system changes in relation to this will be published in due course.

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