The 1st of October is not usually a date which has much meaning in the business world. It is not a significant deadline for Personal Tax or PAYE. Nor is it synonymous with VAT or any deadlines for filling in the many forms required for all of the different taxes. It is therefore a day which can be missed, very easily.
However 1st of October is a date which can affect many businesses, as it is the date on which the minimum wage increases. This year there is an increase of 12p on the adult rate. This year the age at which the adult rate applies has been lowered. From 1st October the adult rate is the rate applicable to over 21’s not over 22’s at it has been previously. This therefore increases the minimum amount to £6.31 an hour.
A brief summary of the changes in rates are:-
- Overs 21’s £6.31
- 18-20s £5.03
- 16-17 £3.72
- Apprentice rate £2.68
- Accommodation offset £4.91
In running a small business the increases in minimum wage can have an effect on the cash flow of the business depending on the number of employees. Failure to pay the minimum wage could lead to an underpayment notice. In these circumstances HMRC will, as well as calculating the amounts which should have been paid by a formula, impose a minimum penalty of £100 up to a maximum of £5,000. This can be reduced by 50% if paid in full within 14 days.
So this year make sure that you look at both the rates and the ages of your employees. It is very easy to miss the increases in the amounts payable if this is not a normal pay review time. Also you need to make sure you know when people have a birthday so that you don’t fall foul of these regulations.
If you need any help with payroll under the new RTI (Real Time Information) system then please contact your partner or our payroll department.