Increase In The Employment Allowance
The employment allowance will increase to £4,000 for 2020/21 meaning that qualifying employers won’t have to pay NI until their liability exceeds this.
If you do have to make people redundant it’s important to understand how to calculate the tax and NI on the redundancy payment.
Work out how much of the termination payment is post-employment notice pay (PENP) using HMRC’s formula. Statutory redundancy pay, and, if paid instead, contractual redundancy pay up to the same amount, are excluded. The PENP amount is taxable as normal pay while the excess is only liable to tax and NI if it’s more than £30,000.
In order to compute PENP, the following formula must be applied to the entire payment received on termination:
((BP x D) / P) – T
where the terms are as defined below:
- BP – Basic pay in the pay period, which ends prior to the date on which notice is given, or, if no notice is given, the termination date.
- D – Number of days in the post-employment notice period. Can be stated in months.
- P – Number of days in the pay period, which ends prior to the earlier of the termination date or the date notice is given. Can be stated in months.
- T – Contractual PILON.
No More (Paper) Tax Returns!
HMRC will no longer automatically send out paper tax returns. If you want to compete and submit your self-assessment on paper, you’ll need to download it from HMRC’s website.