Your Payroll Questions Answered
Q) How do I calculate the Statutory Maternity Pay rebate?
A) The amount of Statutory Maternity Pay (SMP) you can recover depends on the total amount of employer’s and employees’ Class 1 NICs you pay in the appropriate tax year being the tax year before the tax year in which the qualifying week falls (15th week before the baby is due).
- If your Class 1 NICs are £45,000 or less in the appropriate tax year, you can recover 100% SMP and 3% compensation totaling 103% of the total SMP paid in the tax month. When sending the Employer Payment Summary (EPS) each tax period you must include the recovered amount for that tax period. If you do not, HMRC will not include the deduction and you will be expected to pay the full amount shown on the Full Payment Submission (FPS)
- If your Class 1 NICs are greater than £45,000 in the appropriate tax year, you can recover 92% of the total SMP paid in the tax month. Include the amount of the recovery in your EPS for the same tax month. If you do not, then HMRC will not take your deduction into account and expect full payment shown on your FPS.
Q) What is the process for Real Time Information when no payments are due to any employees in a tax period?
A) If there are no payments due for your employees in a tax period, therefore no FPS to submit to HMRC, you must send an EPS by the 19th of the following month.
Q) What is the difference between a BR tax code and 0T tax code?
A) BR Code – Employee’s earnings are taxed at the basic rate of 20%; it’s mainly used when an employee has a second job or pension.
0T code – It is used when a new employee has failed to provide a P46 or P45. 0T will deduct tax at the relevant tax rate 20%, 40%, and 45%. Also it is used when an employee’s tax allowances have been used up or reduced to nil.
Q) When an employee reaches state pension age, at what point would you need to change their NI letter to C?
A) An employee who provides:
- A certificate of age exception – the certificate shows a ‘valid from’ date and is proof that the employee has reached State Pension Age and will not be liable to pay any further NIC contributions on their earnings made on or after that date.
- A passport or birth certificate – can be used as proof they have reached State Pension Age – the date of their 65th birthday will be the date NI contributions will cease.
Late notification of State Pension Age – You will need to reassess the employee’s NI deductions, adjusting any NICs incorrectly paid/deducted in the next tax period. However, in the month of March, you will need to inform the employee who will then need to contact the HMRC to request a refund of any NI over deducted.
Clients can reach this service by dialling 0844 892 2772, and choosing Option 3. This service is available from Monday – Friday between 9am and 6pm.