From 6th April 2016 contracting out of the additional State Pension on a defined benefit basis will cease. Employees will no longer be able to use a contracted-out salary related occupational scheme to contract out of the State Scheme and will be automatically put back into the State pension scheme. The rebate of 1.4% for employers and 3.4% for employees will also end at 5th April 2016.
With the new State Pension being introduced there will a few changes in what and how you report to HMRC:
• Employers will no longer have to report on the Full Payment Submissions to HMRC the Employers Contracting-out Number (ECON) and the Scheme Contracted-out Number (SCON)
• A requirement to report National Insurance earnings between Primary Threshold (PT) and Upper Earnings Limit (UEL), as was required prior to 2009
• It is not necessary to report the information of seperating the National Insurance (NI) earnings between the Primary Threshold (PT) and Upper Accruals Point (UAP) and UAP to Upper Earnings Limit (UEL).
• From the start of the new tax year employers will be no longer be allowed to use your Contracted-out Salary Related (COSR) occupational pension scheme to contract out employees out of the new State Pension scheme.
• The form P60 will change as there will be one less column to complete on the form.
HMRC systems will be all updated to reflect these changes from 6th April 2016 onwards and the UAP field will be removed from the Full Payment Submission (FPS) and Earlier Year Update (EYU).
Regarding the National Insurance Categories for the 2016-17 tax year the Standard Insurance tables/categories A,B,J,M,P,Q,R,T,Y and Z will replace the contracted-out National Insurance tables/categories of D,E,I,K,L,N,O and V.
Recovery rates and National Insurance contributions threshold will remain the same for the 2016-17 tax year, as announced by HMRC. An update has been provided via GOV.UK from HMRC on how to apply for statutory payment types in advance, such as maternity pay, parental, paternal or adoption pay. This is only relevant if the employer requires financial assistance.
In order to apply for the statutory pay in advance with HMRC you will need to either use the online service which you can do through your Government Gateway log in or by completing a form on screen and emailing this to HMRC. You will only need to enter the amount of weeks you are claiming in the 2015-16 tax year. If you are applying for the 2016-17 tax year also you can claim this by indicating that it is for the New tax year. Both can be claimed at the one time but need to be identified on the claim as Current tax year and New tax year.
Further details can be found at https://www.gov.uk/recover-statutory-payments/if-you-cant-afford-to-make-payments
For the tax year beginning 6th April 2016 HMRC will cease to use the suffix 'Y' on tax code notifications P2, P6 and P9. As the personal tax allowance in 2016-17 will increase from £10,600 to £11,000 it will result in the basic personal allowance being higher than the maximum personal age allowance of £10,660 for people born before 6th April 1938.
All employers or pension providers will receive a P9 coding notification for the 2016-17 tax year advising the correct tax code for all individuals affected. All individuals who would have had a 'Y' suffix in their tax code previously will be issued with a P2 notice of coding informing them of their new tax code.
HMRC's systems will still accept the 'Y' suffix if submitted but HMRC have requested the 'Y' suffix not to be used by employers or payroll agents.