After a very strange (tax) year, it’s time to prepare for the 2021/22 tax year. What are the key things to ensure your payroll software can cope with?
Testing times
If there’s one thing that’s become crystal clear in the last few months of the 2020/21 tax year, it’s that payroll software developers have had an uphill struggle to get all the information they need in time for you to run the first payrolls of the new tax year. With this in mind it’s understandable that development time has been shortened so you need to be even more careful than normal to rigorously test your software ahead of that first payroll run, or at the very least carry out some sample checks on the first payslips of the new year.
Pro advice. Sample check: a new starter, a leaver, a representative sample of tax and NI calculations ensuring that tax codes have moved on appropriately for each part of the UK, some employees in receipt of statutory payments and finally that the apprenticeship levy has been calculated correctly.
Tax codes. As well as uplifting all L suffix codes by seven points, ensure that the non-cumulative indicators (week 1/month 1) have been removed. For all new starters joining you who left a job in the previous tax year, but whose start date is between 6 April and 24 May ensure the code is uplifted by seven points if their P45 has an L suffix.
NMW
The national minimum wage (NMW) is increasing for pay periods that begin on or after 1 April 2021 and there is also a change in age eligibility for the top rate. Anyone who is in receipt of SMP and will receive an NMW uplift must have this increase applied to the weekly earnings used to calculate their SMP. They are then paid the resultant addition in the higher rate value of SMP, or the standard rate as well if they were not formerly eligible for the full standard rate due to low earnings.
Deferral certificates
This time last year HMRC was very late in issuing NI deferral certificates to employers. These authorise you to operate only 2% employee NI contributions for those who already pay maximum NI in another employment. You must have certificate CA2700 before operating table J for the new tax year.
Given the lack of development time you need to be even more careful than normal in testing your software ahead of the first payroll run. Sample check a new starter, a leaver and some employees in receipt of statutory payments.
This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.