Prepare your payroll for the National Insurance changes in July 2022
From 6 July 2022, some National Insurance Contributions (NICs) thresholds will increase. The primary threshold for 6 July 2022 to 5 April 2023 will rise to:
- £242 per week
- £1,048 per month
- £12,570 per year
See Class 1 National Insurance thresholds for 2022 to 2023.
To accommodate this change, payroll software, including HMRC’s Basic PAYE Tools, will need to be updated. This may happen automatically, or you might need to take action.
It is important that payments due to be made on 6 July 2022 or later are calculated using the correct thresholds. Employers who run their payroll early should check that their software has been updated before processing and reporting these payments.
HMRC expect that all software will be updated by 6 July 2022, so any payments processed after that date should not need to be delayed. If you are unsure about whether or not your software has been updated, please contact your software provider.
If you use Basic PAYE Tools, please note that this software will be updated to take account of National Insurance threshold increases from 4 July 2022. HMRC advise you to wait until after 4 July 2022 to run payroll for any payments made on or after 6 July 2022.
Please talk to us about these changes and how we can help you with your payroll.
See: Rates and thresholds for employers 2022 to 2023 – GOV.UK (www.gov.uk)
Penalties for overclaimed SEISS grants
HMRC have updated their guidance setting out the procedure for reporting and repaying overclaimed Self-Employed Income Support Scheme (SEISS) Grants. HMRC are also reminding sole traders and partners who have received these grants that there are potential penalties of up to 100% of the amount overclaimed under certain circumstances.
A penalty of up to 100% would apply where the trader knew that they were not entitled to the grant and did not tell HMRC within a 90-day notification period. The law treats the failure as ‘deliberate and concealed’. This means that HMRC may charge a penalty of up to 100% of the amount of the SEISS grant that the trader was not entitled to receive or keep.
Traders are required to notify HMRC if there is an amendment to any of their tax returns on or after 3 March 2021 which either:
- lowers the amount of the fourth or fifth grant they are eligible for; or
- causes the trader to no longer be eligible for the fourth or fifth grant.
If the tax return was amended before claiming the fourth or fifth grant, traders had to tell HMRC within 90 days of receiving the grant.
If the tax return has been amended after receiving the fourth or fifth grant, traders must tell HMRC within 90 days of the amendment.
If the tax return has been amended on or after 3 March 2021, traders do not need to tell HMRC if the grant amount is lowered by £100 or less.
For more details see: Self-Employment Income Support Scheme – receiving grants you were not entitled to (CC/FS47) – GOV.UK (www.gov.uk)
Making Tax Digital for VAT – New penalties for non-compliance
HMRC have issued guidance for VAT-registered business and their agents on how to avoid penalties for non-compliance with the Making Tax Digital for VAT (MTD) rules.
In particular, there is a new £400 per return penalty if you file a return but do not use functional compatible software.
There are additional penalties if the business does not keep its records digitally. HMRC may charge you a penalty of between £5 to £15 for every day on which the business does not meet that requirement.
Key extracts from HMRC guidance include:
You must file your VAT return using functional compatible software
Functional compatible software means a software program, or set of software programs, products or applications (apps) that can:
- record and store digital records.
- provide HMRC with information and VAT returns from the data held in those digital records.
- receive information from HMRC.
You must keep records digitally
You must keep some records digitally within your functional compatible software. This is known as your ‘electronic account’. Your electronic account must contain:
- your business name, address and VAT registration number.
- any adjustments from calculations you make outside your functional compatible software for any VAT accounting schemes you use.
- the VAT on goods and services you supplied, meaning everything you sold, leased, rented or hired (supplies made).
- the VAT on goods and services you received, meaning everything you bought, leased, rented or hired (supplies received).
- any adjustments you make to a return.
- the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you bought and sold.
- the rate of VAT you charged on goods and services.
- your reverse charge transactions, where you record the VAT on the sale price and the purchase price of the goods and services you buy.
- copies of documents that cover multiple transactions made on behalf of your business, like those made by volunteers for charity fundraising, a third-party business or employees for expenses in petty cash.
All transactions must be contained in your electronic account, but you do not need to scan paper records like invoices and receipts.
Please contact us if you need assistance in complying with MTD.
Travelling time and the National Minimum Wage
HMRC have recently updated their guidance to employers on travelling time with reference to National Minimum Wage calculations. Travelling for the purpose of working (i.e. in connection with the employment) which does not fall under a daily average agreement is counted as working time.
This includes the time a worker spends travelling between “assignments” which need to be carried out at different places, to which the worker is obliged to travel. An example here would be a care worker visiting several clients in their own homes.
Travelling between a worker’s place of residence (including temporary residence) and the place of their work is not considered as travelling for the purposes of work. Any time spent on such “home to work” travelling is not considered as working time.
For more details see: NMWM08490 – Working time: unmeasured work: travelling time – HMRC internal manual – GOV.UK (www.gov.uk)
