Welcome to the second instalment of the Friday blog here at AJ Connect. Last week we had our Director of Construction & Property, Martyn Aitken, going over the digital trends that are impacting SMEs within the construction industry. So, if that is relevant to you and your business, be sure to have a look back.
This week our blog comes from our Director of Accountancy & Finance, Steven Jackson, where Steven will be going over a few big changes that could impact payroll in 2021.
Payroll changes that could impact all in 2021
Payroll in 2020 was certainly a different experience for a lot of businesses across the UK, especially with the introduction of the furlough scheme. Of course, everyone is hoping things will be heading back to normality in 2021, but there will certainly be areas to prepare for moving forward.
I have picked out a few areas of change I believe payroll teams need to be aware of.
The first area of change is IR35. Anyone who was due to be impacted by the IR35 legislation will be aware that it was of course postponed by the government for 12 months last April. Due to Covid-19 the government decided to make the sensible decision to delay this by a year, as businesses came to terms with the economic impact of the pandemic.
Anyone unfamiliar with IR35, the rules shift the responsibility for determining the tax status of an contractor from the worker to the organisation. The legislation also requires organisations to understand their supply chain as the rules require an assessment of any contractor providing their services indirectly. As things stand, IR35 looks to be almost certainly introduced from the 6th of April 2021.
Our second area of interest is increase in taxes across the board. Now unlike the IR35 situation, there has been no real cemented change for tax increases in 2021. However, with the government paying out an unexpected circa £40 billion for the furlough scheme thus far, if you are reading between the lines, a tax increase is going to go some way toward repaying this massive amount.
The likely hood is an increase in corporation tax for businesses, but there is a real possibility of an increase to both income tax and national insurance contributions.
Finally, the furlough scheme. The Coronavirus Job Retention Scheme (CJRS) is, as things stand, extended to the end of April this year. The Chancellor of the Exchequers last extension was given in December, which this time around gave businesses more of an idea of how things were looking in 2021 and would have had a major part to play with regards to business decision making for the year.
The scheme currently pays furloughed employees 80% of their monthly wage, up to maximum of £2,500. The scheme has saved millions of jobs over the past ten months or so, but with it coming to an end over the next few months, there is every chance it may have an after effect on many employees. If businesses have managed to make changes to outgoings, where possible, over the last 6 months, they will hopefully be in a better position to retain staff members and start to rebuild.
Thanks for reading and hopefully there was some value in this for you to take away.
If you personally have any enquiries from within the Accountancy or Finance sectors, please do get in touch with our specialist Director Steven Jackson for a chat. AJ Connect are here to support as many businesses & individuals as possible as we look to get back to normality… whatever that may look like!
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