Rates and thresholds for employers 2016 to 2017

Unless otherwise stated, the figures quoted apply between 6 April 2016 and 5 April 2017.

PAYE tax and Class 1 National Insurance contributions

You normally operate PAYE as part of your payroll so HM Revenue and Customs (HMRC) can collect Income Tax and National Insurance from your employees.

Your payroll software will calculate how much tax and National Insurance (NI) to deduct from your employees’ pay.

Tax thresholds, rates and codes

The amount of Income Tax you deduct from your employees depends on their tax code and how much of their taxable income is above their Personal Allowance.

For the tax year 2016 to 2017, the Income Tax information below applies to both Scotland and the rest of the UK (England, Wales and Northern Ireland).

PAYE tax rates, thresholds and codes 2016 to 2017
Employee personal allowance £212 per week
£917 per month
£11,000 per year
Basic tax rate 20% on annual earnings above the PAYE tax threshold and up to £32,000
Higher tax rate 40% on annual earnings from £32,001 to £150,000
Additional tax rate 45% on annual earnings above £150,000
Emergency tax codes 1100L W1, 1100L M1 or 1100L X

Class 1 National Insurance thresholds

You can only make National Insurance (NI) deductions on earnings above the Lower Earnings Limit (LEL).

Class 1 NI thresholds 2016 to 2017
Lower Earnings Limit (LEL) £112 per week
£486 per month
£5,824 per year
Primary Threshold (PT) £155 per week
£672 per month
£8,060 per year
Secondary Threshold (ST) £156 per week
£676 per month
£8,112 per year
Upper Secondary Threshold (under 21) (UST) £827 per week
£3,583 per month
£43,000 per year
Apprentice Upper Secondary Threshold (apprentice under 25) (AUST) £827 per week
£3,583 per month
£43,000 per year
Upper Earnings Limit (UEL) £827 per week
£3,583 per month
£43,000 per year

Class 1 National Insurance rates

Employee (primary) contribution rates

Deduct primary contributions (employee’s National Insurance) from your employees’ pay through PAYE.

NI category letter Earnings at or above LEL up to and including PT Earnings above the PT up to and including UEL Balance of earnings above UEL
A 0% 12% 2%
B 0% 5.85% 2%
C NIL NIL NIL
H (Apprentice under 25) 0% 12% 2%
J 0% 2% 2%
M (under 21) 0% 12% 2%
Z (under 21 – deferment) 0% 2% 2%

Employer (secondary) contribution rates

You pay secondary contributions (employer’s National Insurance) to HMRC as part of your PAYE bill.

Pay employers’ PAYE tax and National Insurance.

NI category letter Earnings at or above LEL up to and including ST Earnings above ST up to and including UEL/UST/AUST Balance of earnings above UEL/UST/AUST
A 0% 13.80% 13.80%
B 0% 13.80% 13.80 %
C 0% 13.80% 13.80%
H (Apprentice under 25) 0% 0% 13.80%
J 0% 13.80% 13.80%
M (under 21) 0% 0% 13.80%
Z (under 21 – deferment) 0% 0% 13.80%

Class 1A National Insurance: expenses and benefits

You must pay Class 1A National Insurance on work benefits you give to your employees, eg a company mobile phone. You report and pay Class 1A at the end of each tax year.

NI class 2016 to 2017 rate
Class 1A 13.8%

Pay employers’ Class 1A National Insurance.

Class 1B National Insurance: PAYE Settlement Agreements (PSAs)

You pay Class 1B National Insurance if you have a PSA. This allows you to make one annual payment to cover all the tax and National Insurance due on small or irregular taxable expenses or benefits for your employees.

NI class 2016 to 2017 rate
Class 1B 13.8%

Pay Class 1B National Insurance.

National Minimum Wage

The National Minimum Wage is the minimum pay per hour almost all workers are entitled to by law. Use the National Minimum Wage calculator to check if you’re paying a worker the National Minimum Wage or if you owe them payments from past years.

The rates below apply from 1 October 2015 and are likely to change again on 1 October 2016.

Category of worker Hourly rate
Aged 21 and above £6.70
Aged 18 to 20 inclusive £5.30
Aged under 18 (but above compulsory school leaving age) £3.87
Apprentices aged under 19 £3.30
Apprentices aged 19 and over, but in the first year of their apprenticeship £3.30

See National Minimum Wage rates for previous years.

Statutory maternity, paternity, adoption and shared parental pay

Use the maternity and paternity calculator for employers to calculate your employee’s SMP, paternity or adoption pay, their qualifying week, average weekly earnings and leave period.

Type of payment or recovery 2016 to 2017 rate
Statutory maternity pay (SMP) – weekly rate for first six weeks 90% of the employee’s average weekly earnings
SMP – weekly rate for remaining weeks £139.58 or 90% of the employee’s average weekly earnings, whichever is lower
Statutory paternity pay (SPP) – weekly rate £139.58 or 90% of the employee’s average weekly earnings, whichever is lower
Statutory adoption pay (SAP) – weekly rate £139.58 or 90% of the employee’s average weekly earnings, whichever is lower
Statutory shared parental pay (ShPP) – weekly rate £139.58 or 90% of the employee’s average weekly earnings, whichever is lower
SMP/SPP/ShPP/SAP – proportion of your payments you can recover from HMRC 92% if your total Class 1 NI (both employee and employer contributions) is above £45,000 for the previous tax year

103% if your total Class 1 NI for the previous tax year is £45,000 or lower

Statutory Sick Pay (SSP)

The same weekly SSP rate applies to all employees. However, the amount you must actually pay an employee for each day they’re off work due to illness (the daily rate) depends on the number of ‘qualifying days’ (QDs) they work each week.

Use the SSP calculator to work out your employee’s sick pay, or use the rates below.

Unrounded daily rates Number of QDs in week 1 day to pay 2 days to pay 3 days to pay 4 days to pay 5 days to pay 6 days to pay 7 days to pay
£12.6357 7 £12.64 £25.28 £37.91 £50.55 £63.18 £75.82 £88.45
£14.7416 6 £14.75 £29.49 £44.23 £58.97 £73.71 £88.45
£17.6900 5 £17.69 £35.38 £53.07 £70.76 £88.45
£22.1125 4 £22.12 £44.23 £66.34 £88.45
£29.4833 3 £29.49 £58.97 £88.45
£44.2250 2 £44.23 £88.45
£88.4500 1 £88.45

Student loan recovery

If your employees’ earnings are above the earnings threshold, record their student loan deductions in your payroll software. It will automatically calculate and deduct repayments from their pay.

Rate or threshold 2016 to 2017 rate
Employee earnings threshold for Plan 1 £17,495 per year
£1,457 per month
£336 per week
Employee earnings threshold for Plan 2 £21,000 per year
£1,750 per month
£403 per week
Student loan deductions 9%

Company cars: Advisory Fuel Rates (AFRs)

Use AFRs to work out mileage costs if you provide company cars to your employees.

The rates below apply from 1 December 2015.

Engine size Petrol – amount per mile LPG – amount per mile
1400cc or less 11 pence 7 pence
1401cc to 2000cc 13 pence 9 pence
Over 2000cc 20 pence 13 pence
Engine size Diesel – amount per mile
1600cc or less 9 pence
1601cc to 2000cc 11 pence
Over 2000cc 13 pence

Hybrid cars are treated as either petrol or diesel cars for this purpose.

Employee vehicles: Mileage Allowance Payments (MAPs)

MAPs are what you pay your employees for using their own vehicle for business journeys.

You can pay your employees an ‘approved amount’ of MAPs each year without having to report them to HMRC. To work out the ‘approved amount’, multiply your employee’s business travel miles for the year by the rate per mile for their vehicle.

Find out more about reporting and paying MAPs.

Type of vehicle Rate per business mile 2016 to 2017
Car For tax purposes: 45 pence for the first 10,000 business miles in a tax year, then 25 pence for each subsequent mile

For NI purposes: 45 pence for all business miles

Motorcycle 24 pence for both tax and NI purposes and for all business miles
Cycle 20 pence for both tax and NI purposes and for all business miles

 

 

PAEROLL comment

We would like to highlight that the National Minimum Wage (NMW) section does not include the new National Living Wage (NLW). Also the statutory payments section does not show that the first six weeks of Statutory Adoption Leave (SAL) is paid at 90% of earnings despite being reported as incorrect in 2015

Employment Allowance

From April 2016, employers will be able to pay 4 full time members of staff at the living wage without incurring employers national insurance.  This is thanks to the increase in the employment allowance increase from £2,000 to £3,000 per year.

The employment allowance was introduced in April 2014 to encourage and support employers to employ more staff without incurring additional employers national insurance contributions.  This is the same reason that the government will now withdraw employment support allowances from sole director companies at the same time.