There are a multitude of rules that new businesses must follow when they start employing staff for the first time. These include ensuring registering for PAYE as an employer with HMRC. This must be done before the first payday and this process must even be completed by directors of a limited company who are employed by the company.

There is no requirement to register as an employer in the event that none of your employees are paid more than £123 a week, don’t receive expenses or benefits and don’t have another job or get a pension. However, even if this was the case you are still required to keep payroll records.

Setting up payroll for the first time can be daunting and we are here to help. As a general rule you have the choice between using a payroll provider or running your own payroll. If you decide to run your own payroll you must choose suitable payroll software.

HMRC also needs to be sent information about tax and other deductions from employees’ pay when the employee is paid. This is done using the Real Time Information (RTI) system which involves employers sending HMRC information each tax month. Tax months run from the 6th of one month to the 5th of the next.

You must also ensure that you are complying with the minimum wage legislation, check that any new employees have the legal right to work in the UK and to be aware that you will be required to offer a workplace pension scheme.

HMRC has published an updated version of the rates and thresholds for employers following the spring statement. The main changes relate to the increases in the National Insurance (NIC) thresholds. This will see the NIC threshold increase from £9,880 to £12,570 from 6 July 2022 and result in the alignment of the Primary Threshold (PT) for Class 1 NICs and Lower Profits Limit (LPL) for Class 4 NICs, with the personal allowance of £12,570.

The PT and LPL will be £9,880 (as previously announced) from 6 April 2022 – 5 July 2022 and £12,570 from 6 July 2022 – 5 April 2023. This means the LPL will be £11,908 for the 2022-23 tax year which is equivalent to 13 weeks of the threshold at £9,880 and 39 weeks at £12,570. HMRC’s document also includes weekly and monthly figures to help calculate weekly / monthly pay.

The increases in NICs of 1.25% – first announced last year – also took effect from April 2022. These increases will be ring-fenced to provide funding for the NHS, health and social care.

The increases will also apply to Class 1 contributions (paid by employees) above the primary and secondary thresholds. Employers should ensure that they have prepared for the increase as these changes will increase wage costs from April 2022.

All existing NICs reliefs to support employers will continue to apply. In addition to the employment allowance, this includes the following:

• employees under the age of 21
• apprentices under the age of 25
• qualifying Freeport employees
• armed forces veteran

There are also corresponding increases in Secondary Class 1 NICs (paid by employers) and Class 4 NICs (paid by the self-employed).

There is no requirement to report certain routine expenses to HMRC. The types of expenses and benefits covered are referred to as exemptions and have replaced dispensations which can no longer be applied for. 

The travel and subsistence benefits that do not need to be reported include reimbursed costs to employees covering business travel. As an alternative to paying the employee back for actual costs incurred, HMRC’s benchmark scale rates or a special bespoke scale rate may be used. Employers only need to apply for an exemption if they want to use a bespoke scale rate which needs to be approved by HMRC. 

Employers that reimburse their employees with more than the necessary costs need to take action. The extra amounts should be added to employee’s other earnings and PAYE and Class 1 NIC’s will be due.

There is usually no tax relief for private travel between a permanent workplace and an employees’ home. Accounting for any tax due on private travel depends on who arranged the transport and who paid for it. There are a number of exceptions such as temporary workplaces and where the employee has a travelling appointment. 

Employers must also ensure that they have a checking system in place to ensure that employees are making valid expenses claims. This requirement is usually satisfied by asking employees to submit or retain receipts as evidence of a valid expense claim. HMRC is clear that employees aren’t allowed to check their own expenses and that someone else within the company must be responsible to ensure a claim is legitimate. 

New National Minimum Wage and National Living Wage rates will come into effect on 1 April 2021. These changes will see the National Living Wage increase by 19p to an hourly rate of £8.91 and the National Minimum Wage will increase to £8.36 (a rise of 16p). There are also increases in the other minimum wage thresholds. 

There are special rules to check that salaried workers who receive an annual salary are being paid at least the equivalent of the minimum wage. 

HMRC’s guidance states that someone is undertaking salaried hours work if all of the following apply:

• their contract states how many hours they must work in return for their salary (their basic hours)
• they’re paid in equal, regular instalments through the year, for example monthly or every 4 weeks
• there is no more than a month between each payment
• they do not get paid more than once a week

Once you know how many basic hours are relevant you can calculate if the employees are being paid at least the minimum wage to which they are entitled. 

There are penalties for employers that are found to have underpaid their workers and, in some cases, there may be criminal prosecutions.

It is not long until the current 2020-21 tax year comes to an end and there are a number of year end payroll chores that must be completed. This includes sending a final PAYE submission for the tax year. The last Full Payment Submission (FPS) needs to be submitted no later than the last payday for your employees of the 2020-21 tax year.

It is also important that employers remember to provide employees with a copy of their P60 form by 31 May 2021. A P60 must be given to all employees that are on the payroll on the last day of the tax year – 5 April 2021. The P60 is a statement issued to employees after the end of each tax year that shows the amount of tax they have paid on their salary. Employers can provide the P60 form on paper or electronically. Employees should ensure they keep their P60s in a safe place as it is an important record of the amount of tax paid.

In addition, a P60 is required in order that an employee can prove how much tax they have paid on their salary, for example:

• to claim back overpaid tax;
• to apply for tax credits;
• as proof of your income if you apply for a loan or a mortgage.

Employees who have left their employment during the tax year do not receive a P60 from their employer, as the same information will be on their P45.

The deadline for reporting any Class 1A National Insurance contributions and submitting P11D and P11FD(b) forms to HMRC for the tax year ending 5 April 2021 is 6 July 2021.

The Coronavirus Job Retention Scheme (CJRS) commonly known as the furlough scheme was due to come to an end on 31 October 2020 but has now been extended until 31 March 2021. Effective from 1 November 2020, employees will receive up to 80% of their salary for hours not worked. There will be a review date of the CJRS in January 2021, which may see employers taking on an increased financial contribution if the economic and health outlook of the country show signs of improvement. 

It is important that employers are aware of the rules for deciding the length of any claim period. The claim period is made up of the days that you are claiming a grant. The start date of your first claim period is the date your first employee was furloughed.

Claim periods starting on or after 1 July 2020 must start and end within the same calendar month. All claim periods starting on or after 1 July 2020 must last at least seven days. You can make a claim for less than seven days if you are claiming for the first few days or the last few days in a month.  However, you can only claim for a period of fewer than seven days if the claim period includes either the first or last day of the calendar month, and you have already claimed for the same employee for the period immediately before.

Employers should ensure they include all of the employees they want to furlough for each claim period, as they will not be able to make another claim for the same period or one that overlaps the claim period.

Employers can claim before, during or after they process payroll as long as the claim is submitted by the relevant claim deadline. Claims from 1 November 2020 must generally be submitted within 14 calendar days following the end of the previous calendar month. Payments will be made within six working days after submission of a claim.

The trivial benefits in kind (BiK) exemption applies to small non-cash benefits like a bottle of wine or a bouquet of flowers given to employees or any other benefit in kind classed as 'trivial' that falls within the exemption.

Although the benefit is defined as ‘trivial’, employers should remember that this offers a great opportunity to give small rewards and incentives to employees. The main caveat being that the gifts are not provided as a reward for services performed or as part of the employees’ duties. However, gifts to employees on milestone events such as the birth of a child or a marriage or other gestures of goodwill would usually qualify.

The employer also benefits as the trivial benefits do not have to be included on PAYE settlement agreements or disclosed on P11D forms. There is also a matching exemption from Class 1 National Insurance contributions.

The tax exemption applies to trivial BiKs where the BiK:

• is not cash or a cash-voucher; and
• costs £50 or less; and
• is not provided as part of a salary sacrifice or other contractual arrangement; and
• is not provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.

The rules also allow directors or other office-holders of close companies and their families to benefit from an annual cap of £300. The £50 limit remains for each gift but could allow for up to £300 of non-cash benefits to be withdrawn per person per year.  The £300 cap doesn’t apply to employees. If the £50 limit is exceeded for any gift, the value of the benefit will be taxable.

The Coronavirus Job Retention Scheme (CJRS) also known as the furlough scheme has been extended until 31 October 2020. There are a number of important changes to the way the scheme works starting from 1 July 2020, when employers can bring back furloughed employees to work part-time, for any amount of time and any shift pattern. One of the specified changes is that the final date employers could furlough staff for the first time was 10 June 2020.

However, employees who return to work from maternity and paternity leave after 10 June had not been considered. The Chancellor, Rishi Sunak, has now confirmed that affected employees could still be furloughed in future as long as their employer has already furloughed employees under the CJRS.

This means that in most cases parents on statutory maternity and paternity leave, who return to work in the coming months after a long period of absence, will be permitted to be furloughed. This change also applies to those on adoption leave, shared parental leave and parental bereavement leave.

Chancellor of the Exchequer Rt Hon Rishi Sunak MP said:

'When I announced these changes to the furlough scheme last month, I was clear that we wanted to do this in a fair way, that supports people back to work as the country begins to re-open following Coronavirus.

But for parents returning from leave, their circumstances has meant that they are still in need of support, and I’m pleased that they will be able to receive the financial assistance they and their family will need.'

If you are an employee, you must tell your employer as soon as possible if you are showing signs of Coronavirus or someone you live with has symptoms of the disease.

Your employer will be able to inform you if you are covered by their sick leave policy. If you are, you may be asked to furnish them with an isolation note that proves you cannot work due to Coronavirus symptoms. You can obtain an isolation note from NHS 111 online in England, NHS inform in Scotland, NHS Direct in Wales and from the Public Health Agency in Northern Ireland.

If you do not qualify for sick pay from your employer, you may be eligible for Statutory Sick Pay (SSP) for every day you are in isolation. You must self-isolate for at least 4 days to be eligible.

You may be eligible for Universal Credit if you cannot get Statutory Sick Pay, for example if you are self-employed or earning below the Lower Earnings Limit of £118 per week. You can request an advance payment of Universal Credit if you do not have enough money to live on whilst waiting for your payment.

You might also be able to:

• apply online for the New Style Jobseeker’s Allowance 
• apply for New Style Employment and Support Allowance, if you have a disability or health condition that affects how much you can work.

Guidance is published by the Department for Work and Pensions about support measures in place if you are employed and have Coronavirus symptoms. 

You must tell your employer as soon as possible if you are showing signs of Coronavirus. Your employer will be able to inform you if you are covered by their sick leave policy. If you are, you may be asked to furnish them with an isolation note that proves you cannot work due to Coronavirus symptoms. You can get an isolation note from NHS 111 online in England, NHS inform in Scotland, NHS Direct in Wales and from the Public Health Agency in Northern Ireland.

If you cannot get sick pay from your employer, you may be eligible for Statutory Sick Pay (SSP) for every day you are in isolation. You must self isolate for at least 4 days to be eligible.

If someone in your household is showing symptoms of Coronavirus then you must stay at home. If you are able to work from home then you should do so. If this is not possible then you may be eligible for sick leave, special leave or SSP.

You may be eligible for Universal Credit if you cannot get Statutory Sick Pay and you can ask for an advance payment if you do not have enough money to live on whilst waiting for your payment.