Budget 2021: What it means for payroll
On 3rd March 2021, Chancellor Rishi Sunak announced plans for tax, employment, and the wider economy in his first 2021 Budget. The key focus for the upcoming year is around creating and supporting jobs, with over 700,000 people facing redundancy since last March.
His plans outlined a starting point for recovery from the economic impact of the COVID-19 pandemic, including further business grants and international trade.
In this article, we’ve provided an overview of the announcements directly impacting payroll departments across the UK.
Furlough scheme extended until September
The furlough scheme will be extended to September 2021, however the terms and eligibility criteria will change for employers. Employees will continue to receive at least 80% of their wages, while employers will be expected to pay 10% towards from July, increasing to 20% in August and September.
The Self-Employed support scheme and the weekly £20 Universal Credit uplift will also continue until September 2021.
National Living Wage to increase to £8.91 from April
The Chancellor reinforced that the government will continue to support the lowest earners, starting with increased hourly pay. The National Living Wage is currently £8.72 for over 25s, increasing to £8.91 for over 23s from 1st April 2021.
Tax thresholds will be frozen from April 2022
Income tax, VAT, and National Insurance won’t be increased in 2021, meaning employees’ take-home pay will not be impacted. The tax-free Personal Allowance thresholds will increase in April 2021, when the basic rate will rise to £12,570 and a higher rate of £50,270. These rates will then be frozen until 2026.
With regards to National Insurance, the primary threshold (below which you won’t pay any NICs) will increase from £9,500 to £9,568 in April 2021. The upper earnings limit will rise from £50,000 to £50,270 and will be frozen until April 2026.
The government has introduced plans to ensure businesses continue to trade and employees stay supported, opening up the economy and reducing unemployment. All the measures announced so far, including last year up until 2022, amounts to £407bn of fiscal support.
Those covered in this article impact payroll teams across the UK and will need to be considered prior to the new tax year to ensure compliance.
Codapay payroll software is prepared for legislative changes with regular updates rolled out across the cloud. Arrange a free 7-day trial on our website.