Legislation changes for 2020/2021 tax year

With Payroll, you can be confident that your service is always up to date with the latest legislation as it is automatically updated with the rates and thresholds for the new tax year

Here are the legislative changes for the 2020/2021 tax year:

Statutory Bereavement Pay

Update Change in the software

From April 2020, employees are entitled to two weeks’ leave following the death of a child which is paid at the statutory paternity rate.

Bereaved parents are entitled to at least two weeks’ leave following the death of a child under the age of 18 or if they suffer a stillbirth from 24 weeks of pregnancy.

Statutory Bereavement Pay (SPBP) can be selected during a pay run.

Within a pay run, select the employee and click Add Absence.

Company Car Tax

Update Change in the software

Tariffs are changing in 2020 to encourage the use of electric and low-emissions vehicles. The new rates are:

CO2 emissions in grams per kilometre Range for Zero Emission Miles 2019-20 2020-21
0 (Electric)   16% 0%
1-50 > 130 16% 2%
1-50 70-129 16% 5%
1-50 40-69 16% 8%
1-50 30-39 16% 12%
1-50 < 30 16% 14%
51-54   16% 15%
55-59   19% 16%
60-64   19% 17%
65-69   19% 18%

You can now record the electric capability of car miles when adding a cash equivalent.

Employment Allowance

Update Change in the software

Employment Allowance allows employers to reduce the amount of employer’s Class 1 National Insurance they pay to HMRC by up to £3,000 per year.

It's currently available to employers of all sizes but, from April 2020, it will be limited to employers with an NI bill of £100,000 of less in the previous tax year.

When you process your year end, you'll be asked whether you want to continue claiming Employment Allowance.

Class 1A Termination Payments

Update Change in the software

Termination payments must now be reported in the Full Payment Submission, in the same pay period they happen.

Employer National Insurance Contributions are due on any payments above £30,000.

 Employees are exempt from National Insurance and only pay income tax on payments over £30,000.

Earlier Year Updates to prior year Full Payment Submissions

Update Change in the software

HMRC has extended the use of the RTI Full Payment Submission (FPS) to employers to continue to report revised year to date payment data after the deadline of 19 April. However, the EYU will still be accepted for the 2018-19 tax year.

 FPS will now be used to make amendments to tax years 18-19 onwards beyond 19 April 2020.

UK tax bands and rates

The following bands are effective from 6 April 2020 for the UK. For employees who live in Scotland, the system will use the Scottish tax bands and rates.

Bandwidth From To Rest of UK Rate (%) Basic Rate Band
37,500.00 0.001 37,500.00 20.00 Yes
112,500.00 37,500.01 150,000.00 40.00 No
Excess 150,000.01 Excess 45.00 No

The emergency tax codes for 2020/2021 are 1250L W1, 1250L M1 and 1250L X.

When you start processing the first pay run of the new tax year, Sage Business Cloud Payroll automatically prompts you to update your employees’ tax codes.

Scottish tax bands and rates

The following Scottish bands are effective from 6 April 2020 for employees who live in Scotland. Employees who live in Scotland are assigned a specific Scottish Tax Code by HMRC. The Scottish taxpayer’s tax code is the same as the rest of the UK tax code, but is prefixed with an S. For example, S1250L.

Your software contains all of the correct legislation updates for Scottish tax for the 2020/2021 tax year, therefore all you need to do is to apply any tax code changes you receive from HMRC.

Band From To Rate (%)
Personal Allowance 0.001 12,500 0
Starter 12,501 14,585 19.00
Basic 14,586 25,158 20.00
Intermediate 25,159 43,430 21.00
Higher 43,431 150,000.00 41.00
Top 150,000.01 46.00

Welsh tax bands and rates

The following Welsh bands are effective from 6 April 2020 for employees who live in Wales. Employees who live in Wales will be assigned a specific Welsh Tax Code by HMRC. The Welsh taxpayer’s tax code is the same as the rest of the UK tax code, but is prefixed with a C. For example, C1250L.

Bandwidth From To Rate (%) Basic Rate Band
37,500.00 0.001 37,500.00 20.00 Yes
112,500.00 37,500.01 150,000.00 40.00 No
Excess 150,000.01 Excess 45.00 No

National insurance (NI) bands and rates

The new earnings thresholds for Class 1 National Insurance calculations are effective from 6 April 2020.

Earnings Limit Weekly Monthly yearly
Lower Earnings Limit (LEL) 120.00 520.00 6240.00
Primary Threshold (PT) 183.00 792.00 9500.00
Secondary Threshold (ST) 169.00 732.00 8788.00
Upper Earnings Limit (UEL) 962.00 4167.00 50,000.00
Upper Secondary Threshold (UST) 962.00 4167.00 50,000.00
Apprentice Upper Secondary Threshold (AUST) 962.00 4167.00 50,000.00

You can find information for other NI categories, from our support guide.

Statutory payments

From 6 April 2020, the statutory sick pay (SSP) rate is £94.25 per week.

The 2020/2021 rates for statutory maternity pay (SMP), statutory paternity pay (SPP), statutory paternity pay adoption (SPPA), shared parental pay (ShPP) and statutory adoption pay (SAP) are as follows:

Payment Minimum weekly earnings £ Higher rate % The standard rate is the lesser of
SMP 120.00 90.00 £151.20 or 90%
SPP, SPPA and ShPP 120.00 N/A £151.20 or 90%
SAP 120.00 90.00 £151.20 or 90%

Employment allowance

The employment increases to £4,000 in the 2020/2021 tax year. The qualifying criteria for employment allowance has changed, and you now need to apply each tax year. If you’re unsure whether or not you’re eligible for employment allowance, you must speak to HMRC.

You can find further information about claiming employment allowance, from our support guide.

Student loan rates

When you set up a student loan deduction for an employee, you must specify whether they’re on Plan 1 or Plan 2. In the 2019/2020 tax year, the repayments are deducted based on the following thresholds:

Type Weekly £ Monthly £ Annual £ Rate %
Plan Type 1 372.88 1615.83 19,390.00 9.00
Plan Type 2 511.05 2214.58 26,575.00 9.00

You can find further information about processing student loans from our support guide.

Postgraduate loans

Type Weekly £ Monthly £ Annual £ Rate %
Standard 403.84 1,750.00 21,000.00 6.00

National minimum/living wage

Workers aged Rates up to April 2019 Rates from April 2020
25 and over £8.21 £8.72
21 to 24 £7.70 £8.20
18 to 20 £6.15 £6.45
Under 18 £4.35 £4.55
Apprentice £3.90 £4.15

For full details about the legislation, please visit the GOV.UK website.

Visit the Payroll Year End Centre >