As with the Spring Budget 2021, much of the detail for the Autumn Budget had been leaked to the press prior to the official report to parliament, 27th October 2021. But we now have all the details and, as usual, there is much to consider. The following Budget summary is split into two sections: Taxation changes Other announcements Please call if you need to discuss how these changes may affect your business or tax affairs in the coming months. Taxation changes Income Tax 2022-23 to 2025-26 No increase in rates and the higher rate threshold is frozen at £37,700 through to April 2026. For the same period, the personal tax allowance is also frozen at £12,570 (£12,570 2021-22) and will apply to all regions of the UK. In what many commentators consider to be a “stealth tax”, wage earners benefitting from annual increases in their earnings up to April 2026 will find themselves paying tax on the full value of any increases. This is because, with personal allowances and the higher rate thresholds frozen until April 2026, any increases in earnings will be taxed and, in some cases, this may push earnings into the higher rate tax bands. Regional variations to Income Tax rates may apply in Wales and Scotland. Income Tax and dividend income The current £2,000 dividend tax-free allowance is unchanged. As announced 7 September 2021, the tax rates payable on dividend income will increase in line with the 1.25% increase in certain NIC contributions. The rates that will apply in all regions of the UK from 6 April 2022 are: Dividends that form part of the basic rate band – 8.75% (7.5% 2021-22) Dividends that form part of the higher rate band – 33.75% (32.5% 2021-22) Dividends that form part of the additional rate band – 39.35% (38.1% 2021-22) Starting rate for savings The band of savings income that is subject to the 0% starting rate will remain at £5,000 for 2022-23. Reform of Basis Periods for self-employed and partners The basis on which profits are taxed in a tax year are to be changed from the account’s year ending in a tax year to the actual profits arising in a tax year. Self-employed sole traders and partners who already have a year end at the end of the tax year will experience no change in their basis of taxation. For affected traders with year ends other than the end of March or 5 April, there will be a transition to an actual basis during 2023-24 and the new rules will come into force from 6 April 2024. The reform will include greater flexibility on the use of overlap relief in the transition year and provisions to reduce the impact of transition profits on allowances and profits. National Insurance Boris Johnson announced – earlier this year – a 1.25% increase in certain National Insurance Contributions from April 2022. This is ring-fenced to provide funding for health and social care. From April 2023, this NIC increase will be withdrawn and replaced by a new Health and Social Care Levy at the same rate. The government will use the September Consumer Prices Index figure of 3.1% as the basis for uprating National Insurance limits and thresholds, and the rates of Class 2 and 3 National Insurance contributions, for 2022-23. This excludes the Upper Earnings Limit and Upper Profits Limit which will be maintained at 2021-22 levels, in line with the higher rate threshold for Income Tax. Lifetime Allowance for pension pots From April 2021 to April 2026 the pensions lifetime allowance will remain frozen at £1,073,100. Capital Gains Tax Any attempt to align CGT rates with Income Tax rates seems to be off the table for the time being. Apart from anti-avoidance changes, there are two changes worth mentioning: Capping the annual exempt amount. This was fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives, and some types of trusts for disabled people; and £6,150 for trustees of most settlements, and The deadline for reporting chargeable residential property sales – not a main residence, this covers sales of second homes or buy-to-let properties – is increased from 30 days to 60 days. This change applies to disposals that complete on or after 27 October 2021. The second change is welcomed as the 30 days reporting window was a tight reporting timeline in which to gather all the relevant data to make a submission to HMRC and to pay any taxes due. Corporation Tax No change in Corporation Tax rates until April 2023. For the financial year beginning 1 April 2022, the rate will remain at 19%. As announced earlier this year, from 1 April 2023, there will be two rates of CT. Taxable profits up £50,000 will continue to be taxed at 19% Taxable profits more than £250,000 will be taxed at 25% Profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and for short accounting periods. Corporation Tax and banking companies From 1 April 2023, the rate of surcharge on banking companies will be 3% and the surcharge allowance increased from £25m to £100m. Corporate Tax – R&D Relief R&D tax reliefs will be reformed to support modern research methods by expanding qualifying expenditure to include data and cloud costs. This will effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK, and target abuse and improve compliance. These changes will be legislated for in Finance Bill 2022-23 and take effect from April 2023. Museums and Galleries Exhibition Tax Relief The sunset clause in this relief is extended for a further two years until 31 March 2024. Cultural Relief changes Theatre Tax Relief and Museums and Galleries Tax Relief Rates will increase from 20% (for non-touring productions) and 25% (for touring productions) to 45% and 50% respectively from 27 October 2021. From 1 April 2023, the rates will fall to 30% and 35%, with a return to 20% and 25% on 1 April 2024. As mentioned above, the Museums and Galleries Tax Relief will expire after 31 March 2024. Orchestra Tax Relief From 27 October 2021, the relief will increase from 25% to 50%, reducing to 35% from 1 April 2023, and returning to 25% from 1 April 2024. Reliefs for investments in qualifying assets Super-deduction The temporary “Super-deduction” and a 50% first year allowance – that were introduced April 2021 – will continue to apply to qualifying expenditure up to 31 March 2023. The super-deduction allows businesses to remove 130% of qualifying expenditure as a deduction from taxable profits. Annual Investment Allowance The existing Annual Investment Allowance (AIA) was due to reduce to £200,000 (from the present £1m) from 1 January 2022. This date has been changed. The £1m of AIA relief will now revert to £200,000 from 1 April 2023. Business owners thinking about high-value investments in qualifying assets will now have more time to consider their timing of capital acquisitions. Reform of loss relief rules for Corporation Tax The government will legislate in the Finance Bill 2021-22 to amend the loss relief rules to ensure that the legislation continues to work as intended for companies adopting International Financial Reporting Standard (IFRS) 16. The changes will have retrospective effect from 1 January 2019. Van and car benefit changes This measure increases the van benefit charge and the car and van fuel benefit charges by the Consumer Price Index from 6 April 2022. The flat-rate van benefit charge will increase to £3,600; the multiplier for the car fuel benefit will increase to £25,300; and the flat-rate van fuel benefit charge will increase to £688. Inheritance Tax No changes to present rates and allowances. These are all frozen at current levels until April 2026. This means the nil-rate band will continue to be £325,000 and the residence nil-rate band at £175,000, for this period. VAT There will be no changes to the 20% rate. The £85,000 registration limit and the £83,000 deregistration limit will remain at these levels until 31 March 2024. The temporary reduced rate of 5% for hospitality, holiday accommodation and attractions was increased to 12.5% from 1 October 2021. This rate will remain until 31 March 2022 when it will revert to 20%. This acknowledges the disruption and financial hardship suffered by this sector during the COVID pandemic. VAT rules in Freeports From 3 November 2021, the government will introduce new elements into the VAT free zone model for Freeports.  They are: implement a free zone exit charge to ensure businesses do not gain an unintended tax advantage from the zero-rate in the free zone model, make amendments to existing VAT law to ensure free zone rules and warehousing rules are mutually exclusive, amend some parts of historic free zone legislation which are incompatible with the new free zone VAT rules.   Other announcements Business rates changes The business rates multipliers are frozen for a second year until 31 March 2023. The small business multiplier is set at 49.9p and the standard multiplier at 51.2p. Different rates apply in London and in Wales. The freezing of the multipliers will mean that your business rates will not increase in 2022/23. Eligible retail, hospitality and leisure properties will benefit from a 50% relief in their business rates for 2022/23, subject to a cap of £110,000 per business. A relief is also being introduced for improvements to business properties which will delay the start date of higher business rates triggered by the improvements for 12 months. The government are to consult on how to implement the relief, which will take effect from 2023 and will be reviewed in 2028. If you are planning improvements to your business premises, this may benefit you. From 1 April 2023 until 31 March 2035 a targeted business rates exemption will apply for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief will be available for eligible heat networks. This is to support the decarbonisation of non-domestic buildings. From 2023, business rate revaluations will take place every three years rather than every five years. Transitional relief for small and medium-sized businesses is extended for one year, which will restrict bill increases to 15% for small properties (i.e. those with a rateable value of up to £20,000 or up to £28,000 in Greater London), and to 25% for medium properties (i.e. those with a rateable value of up to £100,000). Increasing the normal minimum pension age The earliest age at which pension savers can access their pensions without incurring an unauthorised payments tax charge is changing. From 6 April 2028, the normal minimum pension age is increasing from 55 to 57. Universal Credits To compensate for the recent withdrawal of the £20 a week UC payment, the government is to decrease the amount it reduces UC payments when a claimant works more hours. Presently, for every £1 earned UC payments decrease by 63p. From 1 December 2021 at the latest, this will be lowered to 55p for every £1 earned. Duties and Miscellaneous taxes  Tobacco Duty will be increased by agreed rates above the Retail Prices Index (RPI) from 6pm on 27 October 2021. Alcohol duty rates will be frozen. Landfill Tax will increase in line with RPI increases. The increase will be effective from April 2022. Aggregates Levy – the government will freeze the Levy rates in 2022-23. Gaming Duty will increase in line with RPI changes. The increase will be effective from April 2022. VED rates for cars, vans and motorcycles will increase in line with RPI changes. Change will be effective from April 2022. VED rates for HGVs. The government will continue to freeze HGV VED for 2022-23. It will also suspend the HGV Levy for a further year from 1 August 2022. Fuel Duty rates for 2022-23 will remain frozen. Air Passenger Duty rates for flights within the UK will be reduced from April 2023 when new bandings are introduced. Rates for short and long-haul flights will increase in line with the RPI and a new ultra-long-haul band will be introduced. ISA investment limits for 2022-23 The limits set for 2022-23 are: Adult ISAs the limit remains at £20,000 Junior ISA limit remains at £9,000 Child Trust Funds remain unchanged at £9,000 National Living Wage increases The NLW will increase to £9.50 per hour (previously £8.91) from 1 April 2022. The full changes to the National Minimum Wage rates from 1 April 2022 are as follows: The 21 to 22 year-old rate will be £9.18 per hour The 18 to 20 year-old rate will be £6.83 per hour The 16 to 17 year-old rate will be £4.81 per hour The apprentice rate will be £4.81 per hour

On Friday afternoon, in the Government’s daily news briefing, the Chancellor outlined how the Coronavirus Job Retention Scheme will operate moving forward to allow for employees to return to work part time. Following that announcement, self-employed workers got a boost when it was revealed that they will be able to get Government assistance for a further three months. The new details are outlined below.

Self-Employed Income Support Scheme (SEISS)

No doubt due to recent lobbying by the press and other interested support groups, the Chancellor has extended the SEISS for a final three-month period to 31 August 2020.

This means that the self-employed who are eligible to claim will have received six-months financial support from government.

As before, applicants will have to wait until the last month of the claim period, August 2020, to make a claim.

A bullet-point summary of the changes is set out below:

• SEISS extended for three months to 31 August 2020
• Applications covering the June – August 2020 period will open in August.
• Grant available will be 70% of eligible earnings (previous quarter 80%).
• Maximum grant for the three-months will be £6,570 (previous quarter £7,500) paid in a single instalment.
• Eligibility criteria remains unchanged.
• A self-employed person can claim for the second grant, to August 2020, even if they had not claimed for the first grant.
• More information on these changes will be published 12 June 2020.

If you are eligible to make a claim for this second grant under the scheme you will still be subject to the same rules regarding eligibility. You will need to confirm that your business has been adversely affected by the Coronavirus outbreak.

If you did not claim for the first quarter, to May 2020, as your business at that time was not adversely affected, but will be affected in the quarter to 31 August 2020, it will be possible to claim for the second quarter.

And finally, claims for the first quarter (March-May 2020) will close 13 July 2020.

Coronavirus Job Retention Scheme (CJRS)

As previously announced, the CJRS has been extended to 31 October 2020 and will be changed to a flexible arrangement from 1 July 2020 to allow employees to resume part-time working.

The Chancellor and his advisers will be gritting their teeth as drawing a line in the sand by tapering and then closing the CJRS on 31 October 2020 will force the hand of employers to consider their options. It is likely that redundancies will start to climb from that date as will the number of the unemployed.

A bullet-point summary of the changes announced is set out below:

• The CJRS will close to new entrants on 30 June 2020. The final date employers can furlough staff for the first time will be 10 June 2020.
• From 1 July 2020, employers can bring back employees to work part-time, for any amount of time and any shift pattern. Any claim under CJRS will be limited to normal hours not worked.
• June/July 2020 – Government will continue to pay 80% of costs up to the £2,500 cap.
• August 2020 – Government will pay 80% of wages up to £2,500 cap, but employers will have to cover employers’ NIC and pension costs for the hours the employee does not work.
• September 2020 – Government will pay 70% of wages up to a reduced £2,187.50 cap. Employers will pay employers’ NIC, pension costs and 10% of wages to a total cap of £2,500.
• October 2020 – Government will pay 60% of wages up to a reduced £1,875 cap. Employers will pay employers’ NIC, pension costs and 20% of wages to a total cap of £2,500.
• The cap will be proportional to hours not worked.
• The CJRS will be closed-down 31 October 2020.

The above changes to a flexible approach cloak a raft of detail that government is not publishing until 12 June 2020. Those responsible for making CJRS claims will need to wait for these further clarifications as they will explain how employers should calculate claims.

We will be integrating the changes into our payroll services when they are available and will contact clients if further details regarding part-time working are to be introduced.

Clearly, there are planning considerations. Please call if you have employees on furlough and you need to consider your options; for part-time working up to 31 October and longer-term considerations after this date

Find out how to calculate 80% of your employee’s wages, National Insurance Contributions and pension contributions if you’ve furloughed staff due to coronavirus (COVID-19).

The online service you’ll use to claim will be available on 20 April 2020. You cannot make a claim now.

You can claim for 80% of your employee’s wages (even for employee’s on National Minimum Wage) – up to a maximum of £2,500 per month.

You’ll still need to pay employer National Insurance and pension contributions on behalf of your furloughed employees, and you can claim for these too.

You cannot claim for:

• additional National Insurance or pension contributions you make because you choose to top up your employee’s wages
• any pension contributions you make that are above the mandatory employer contribution

You must check that you can use the scheme first.

You can choose to top up your employees’ wages, but you do not have to. Employees must not work or provide any services for the business while furloughed, even if they receive a top-up wage.

Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they are written to confirming their furloughed status.

Use the calculator

A calculator will be available from 20 April 2020 to assist you in calculating how much you can claim.

What to include when calculating wages

The amount you should use when calculating 80% of your employees’ wages is regular payments you are obliged to make, including:

• regular wages you pay to employees
• non-discretionary overtime
• non-discretionary fees
• non-discretionary commission payments
• piece rate payments

You cannot include the following when calculating wages:

• payments made at the discretion of the employer or a client – where the employer or client was under no contractual obligation to pay, including:
  • tips
  • discretionary bonuses
  • discretionary commission payments
• non-cash payments
• non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay

The entirety of the grant received to cover an employee’s subsidised furlough pay must be paid to them in the form of money. No part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme.

Where the employer provides benefits to furloughed employees, including through a salary sacrifice scheme, these benefits should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.

Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.

Apprenticeship Levy and Student Loans

Both the Apprenticeship Levy and Student Loans should continue to be paid as usual. Grants from the Job Retention Scheme do not cover these.

National Minimum Wage

Individuals are only entitled to the National Living Wage, National Minimum Wage or Apprentices Minimum Wage for the hours they are working or treated as working under minimum wage rules.

This means that furloughed workers who are not working can be paid the lower of 80% of their wages or £2,500 even if, based on their usual working hours, this would be below their appropriate minimum wage.

However, time spent training is treated as working time for the purposes of the minimum wage calculations and must be paid at the appropriate minimum wage, taking into account the increase in minimum wage rates from 1 April 2020. As such, employers will need to ensure that the furlough payment provides sufficient monies to cover these training hours. Where the furlough payment is less than the appropriate minimum wage entitlement for the training hours, the employer will need to pay the additional wages to ensure at least the appropriate minimum wage is paid for 100% of the training time.

Where a furloughed worker is paid close to minimum wage levels and asked to complete training courses for a substantial majority of their usual working time, employers are recommended to seek independent advice or contact Acas.

If you’re claiming for a member of a Limited Liability Partnership (LLP)

If a member of an LLP is treated as an employee (because of salaried members rules), you must only include payments that are either:

• fixed
• variable, but are varied without reference to the overall amount of the profits or losses of the LLP
• not affected by the overall amount of the LLP’s profits or losses

Holiday Pay

Furloughed employees continue to accrue leave as per their employment contract.
The employer and employee can agree to vary holiday entitlement as part of the furlough agreement, however almost all workers are entitled to 5.6 weeks of statutory paid annual leave each year which they cannot go below.

Employees can take holiday whilst on furlough. Working Time Regulations require holiday pay to be paid at the employee’s normal rate of pay or, where the rate of pay varies, calculated on the basis of the average pay received by the employee in the previous 52 working weeks. Therefore, if a furloughed employee takes holiday, the employer should pay their usual holiday pay in accordance with the Working Time Regulations.

Employers will be obliged to pay additional amounts over the grant, though will have the flexibility to restrict when leave can be taken if there is a business need. This applies for both the furlough period and the recovery period.

If an employee usually works bank holidays then the employer can agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave then the employer would either have to top up their usual holiday pay, or give the employee a day of holiday in lieu.

During this unprecedented time, we are keeping the policy on holiday pay during furlough under review.

Employees returning from family-related statutory leave

Family-related statutory leave includes maternity leave, paternity leave, shared parental leave, adoption leave, parental bereavement leave and unpaid parental leave.

In line with other employees, claims for full or part time employees furloughed on return from family-related statutory leave should be calculated against their salary, before tax, not the pay they received whilst on family-related statutory leave. The same principles apply where the employee is returning from a period of unpaid statutory family-related leave.

Claims for those on variable pay, returning from statutory leave should be calculated using either the:

• same month’s earning from the previous year
• average monthly earnings for the 2019 to 2020 tax year

Employees returning to work after being on sick pay

In line with other employees, claims for full or part time employees furloughed on return to work after time off sick should be calculated against their salary, before tax, not the pay they received whilst off sick.

Claims for those on variable pay, returning to work after time off sick should be calculated using either the:

• same month’s earnings from the previous year
• average monthly earnings for the 2019 to 2020 tax year

Unpaid sabbatical or unpaid leave

If your employee has been on unpaid sabbatical or unpaid leave, you’ll need to use the amount they would have been paid if they were on paid leave when calculating 80% of their wages.

Work out the maximum wage amount you can claim

The maximum wage amount you can claim is £2,500 a month, or £576.92 a week, plus any National Insurance and pension contributions you can claim for.

If the length of time you’re claiming for is not one week or one month, you’ll need to use the daily maximum wage amounts to work out the maximum amount you can claim for each employee.

To work out the maximum amount you can claim, multiply the daily maximum wage amount by the number of days your employee is furloughed for in your claim.

Month	Daily maxiumum wage amount
March 2020	£80.65 per day
April 2020	£83.34 per day
May 2020	£80.65 per day

If your employee is furloughed over two calendar months, you’ll need to calculate the maximum amount for each calendar month and add them together.

If you’re claiming for multiple pay periods in one claim, you can calculate the total maximum using a mixture of:

• the daily maximum wage amount
• the weekly maximum wage amount
• the monthly maximum wage amount

Example of working out the maximum wage amount for part of a pay period

A Limited company pays all of their employees weekly on each Friday and puts all of their employees on furlough on Wednesday 8 April 2020.

A Ltd will need to calculate the grant using the daily calculation for the first pay period which ends on Friday 10 April 2020. This is £83.34 multiplied by 3 days, which is £250.02.

For the next pay period, 11 April 2020 to 17 April 2020, the maximum amount is £576.92 because the pay period is a whole week, and the employee is furloughed on each day.

A Ltd makes a claim for 8 April 2020 to 17 April2020. The maximum wage amount that they can claim for is the two amounts added, £826.94.

Work out 80% of your employee’s usual wage

You must use these calculations to work out how much you can claim.

A calculator will be available from 20 April 2020 to assist you in calculating how much you can claim.

The way you should work out 80% of your employee’s usual wages is different depending on the way they’re paid. You must check what you can include as wages first.

Choose the calculation you think best fits the way your employee is paid. For example, if you pay your employee a regular salary, use the calculation for fixed pay amounts. HMRC will not decline or seek repayment of any grant based solely on the particular choice of pay calculation, as long as a reasonable choice of approach is made.

You must pay the full amount of the grant to your employee.

Where a claim covers multiple pay periods, this calculation should be done for each and then added together.

Work out 80% of wages for fixed rate full or part time employees on a salary

Where a claim covers multiple pay periods, this calculation should be done for each and then added together.

Claim for the 80% of the employee’s wages, from their last pay period before 19 March 2020.

If you have already calculated your claim based on the employee’s wages as of 28 February 2020, and this differs from their wages in their last pay period prior to 19 March 2020, you can choose to still use this calculation for your first claim.

To work out 80% of your employee’s wage:

1. Start with your employee’s wages, which is their last pay period before 19 March – if you’re claiming for a full pay period, skip to step 4.
2. Divide by the total number of days in the pay period.
3. Multiply by the number of furlough days in the pay period.
4. Multiply by 80%.

Example

Worker started work for B Ltd in 1997 and is paid a regular monthly salary on the last day of each month. The worker agreed to be placed on furlough from 23 March 2020. The worker was paid £2,400 for the last full monthly pay period before 19 March 2020. There are 9 days between 23 March and 31 March.

1. Start with £2,400 (employee’s wages)
2. Divide by 31 (the total number of days in March)
3. Multiply by 9 (the number of furlough days in March)
4. Multiply by 80% – which is £557.42

If your employee has not been paid for a full pay period up to 19 March 2020

If your employee has not been paid for a full pay period up to 19 March 2020, you’ll need to work out what their usual wages are and then calculate 80%. To do this:

1. Start with amount they’ve been paid in their last pay period.
2. Divide by the number of days in their last pay period (including non-working days).
3. Multiply by the number of days that would have been in that pay period.
4. Divide by the total number of days in this pay period.
5. Multiply by the number of furlough days in this pay period.
6. Multiply by 80%.

Example

Employee started work for B Ltd on 21 February 2020 and is paid on the last day of each month. The employee had not had a full pay period up to 19 March 2020, but was paid £700 as a pro-rata of their salary on 29 February 2020. There are 9 days between 21 February and 29 February. The employee agrees to be furloughed from 25 March 2020. There are 7 days between 25 March and 31 March.

1. Start with £700 (the amount they were paid in their last pay period)
2. Divide by 9 (the number of days in their last pay period – including non-working days)
3. Multiply by 29 (days in February)
4. Divide by 31 (the total number of days in the March pay period)
5. Multiply by 7 (the number of furlough days in the March pay period)
6. Multiply by 80% – which is £509.32

Employees whose pay varies and were employed from 6 April 2019

If the employee has been employed continuously from the start of the 2019 to 2020 tax year, you can claim the highest of either:

• 80% of the same month’s wages from the previous year (up to a maximum of £2,500 a month)
• 80% of the average monthly wages for the 2019 to 2020 tax year (up to a maximum of £2,500 a month)

To calculate 80% of the same month’s wages from the previous year:

1. Start with the amount they earned in the same period last year.
2. Divide by the total number of days in this pay period – including non-working days.
3. Multiply by the number of furlough days in this pay period.
4. Multiply by 80%.

Example of claiming for the same period last year

A Ltd pays an employee on a weekly basis. The employee’s pay period starts on 23 March 2020 and ends on 29 March 2020. The employee was paid £350 for 23 March 2019 to 29 March 2019. The employee was furloughed for the whole week.

1. Start with £350 (the amount they earned in the same period last year)
2. Divide by 7 (the total number of days in this pay period)
3. Multiply by 7 (the number of furlough days in this pay period)
4. Multiply by 80% – this is £280

To work out 80% of the average monthly wages for the last tax year:

1. Start with the amount they earned in the tax year up to the day before they were furloughed.
2. Divide it by the number of days from the start of the tax year – including non-working days (up to the day before they were furloughed, or 5 April 2020 – whichever is earlier).
3. Multiply by the number of furlough days in this pay period.
4. Multiply by 80%.

Example of working out 80% of average monthly wages for the last tax year

Worker started work for A Ltd in 2010 and was placed on furlough on 23 March 2020, earning £15,000 between 6 April 2019 and 22 March 2020 inclusive. There are 353 days between 6 April 2019 and 22 March 2020. A Ltd is claiming for 23 March to 31 March 2020. There are 9 days between 23 March and 31 March.

1. Start with £15,000 (the amount they earned in the tax year up to the day before they were furloughed)
2. Divide it by 353 (the number of days from the start the tax year, up to the day before they were furloughed)
3. Multiply by 9 (the number of furlough days in this pay period)
4. Multiply by 80% – this is £305.95

Employees whose pay varies and who started employment after 6 April 2019

If the employee started their employment after 6 April 2019, claim for 80% of their average monthly wages since they started work until the date they are furloughed, up to a maximum of £2500 per month.

To work out 80% of your employee’s average monthly earnings:

1. Start with the amount they earned in the tax year up to the day before they were furloughed.
2. Divide it by the number of days they’ve been employed since the start of the tax year – including non-working days (up to the day before they were furloughed or 5 April 2020 – whichever is earlier).
3. Multiply by the number of furlough days in this pay period.
4. Multiply by 80%.

Every day or period after the employee commenced employment with the employer is counted in making this calculation. This includes days when no work was undertaken.

Example of working out 80% of average monthly wages for the last tax year

Employee started work for A Ltd in 1 May 2019 and was placed on furlough on 23 March 2020, earning £15,000 between 1 May 2019 and 22 March 2020 inclusive. There are 327 days between 1 May 2019 and 22 March 2020. A Ltd is claiming for 23 March to 31 March 2020. There are 9 days between 23 March and 31 March.

1. Start with £15,000 (the amount they earned in the tax year up to the day before they were furloughed)
2. Divide it by 327 (the number of days from the start the tax year, up to the day before they were furloughed)
3. Multiply by 9 (the number of furlough days in this pay period)
4. Multiply by 80% – this is £330.28

Work out how much you can claim for employer National Insurance contributions

You can claim reimbursement for the cost of some or all of the Class 1 employer National Insurance contributions paid on the gross pay grant you pay to the employee.

You can choose to provide top-up salary in addition to the grant. Employer National Insurance contributions on any additional top-up salary will not be funded through this scheme.

Working out what you can claim

The total grant for employer National Insurance contributions cannot exceed the total amount of employer National Insurance contributions you are due to pay.

In calculating the total employer National Insurance contributions paid in any pay period, the employer should subtract any Employment Allowance used in that pay period. If you have not, or do not expect to pay any employer National Insurance contributions in a pay period as a result of the Employment Allowance, you should not claim any employer National Insurance contributions costs for furloughed employees in that pay period. If you expect to exhaust any Employment Allowance in a pay period then you should claim the lower of the employer National Insurance contributions grant calculation, and the employer National Insurance contributions costs that you paid, or expect to pay across your entire payroll.

The total employer National Insurance contributions due in a pay period should be apportioned on a daily basis, with the amount apportioned to any qualifying furlough days forming the basis of the amount that can be claimed through the scheme.

If your employee is furloughed for the whole pay period, and you do not top up their pay

To work out how much you can claim to cover employer National Insurance contributions:

1. Start with the grant you’re claiming for employee’s wages.
2. Minus the relevant secondary National Insurance contributions threshold.
3. Multiply this amount by 13.8%.

Tax year	National Insurance contribution thresholds
2019 to 2020	£166 per week, £719 per month or £8,632 per year
2020 to 2021	£169 per week, £732 per month or £8,788 per year

Example

A Ltd pays employees on a calendar monthly basis. An employee was furloughed on 1 April 2020 is paid £1,500 of furlough pay on 30 April 2020. A Ltd did not top up the employee’s pay.

1. Start with £1,500 (the grant you’re claiming for employee’s wages)
2. Minus £732 (the relevant secondary National Insurance contributions threshold)
3. Multiply this amount by 13.8% – this is £105.98

The total amount of the grant that can be claimed towards employer National Insurance contributions is £105.98 for this employee. A Ltd should also consider whether the claim needs to be adjusted for any amount of Employment Allowance that A Ltd might claim.

If your employee is not furloughed for the whole pay period or you top up their pay

If the pay period covers both furloughed and working periods, or you top up your employees pay over the amounts covered by the grant the following steps will help you calculate the amount of employer National Insurance contributions for each employee:

1. The amount of pay minus the relevant National Insurance contributions secondary threshold.
2. To calculate the employer National Insurance contributions due on an employee’s total pay for the pay period, the result of Step 1 is multiplied by 13.8%.
3. Divide the amount of employer National Insurance contributions due for the pay period by the number of days in the pay period.
4. The grant is capped at the total amount of employers’ National Insurance contributions due to be paid in respect of an employee. Multiply the result of Step 3 by the number of qualifying furlough days in the pay period.
5. Multiply the result of Step 4 by the proportion of pay received in respect of the qualifying furlough days that is funded by the grant.

Example

An employee who is paid a fixed amount monthly agrees to be furloughed by A Ltd on 16 April 2020. The employee’s gross pay at the end of the month is £2,160. This is made up of £1,200 of wages funded by A Ltd, in respect of 1 to 15 April (15 days), and £960 of pay wholly funded by a grant in respect of 16 to 30 April (15 days). The total employer National Insurance contributions due for the pay period is apportioned on a daily basis to determine how much can be covered by a grant for employer National Insurance contributions.

1. £2,160 minus £732 (the amount of pay minus the relevant National Insurance contributions secondary threshold)
2. Multiply by 13.8% (this gives you the amount employer National Insurance contributions due on an employee’s total pay for the pay period)
3. Divide by 30 (the number of days in the pay period)
4. Multiply by 15 (the number of furlough days in the pay period)
5. Multiply by 100% (because the employee’s wage is not being topped up) – this is £98.53

A Ltd can claim £98.53 in respect of the employer National Insurance contributions due on the employee’s March pay. The total grant for employer National Insurance contributions cannot exceed the total amount of employer National Insurance contributions due to be paid.

Example

If A Ltd chooses to top up the same employee’s pay to 100% during the period of furlough, the employer National Insurance contributions must be apportioned between the pay funded by the grant and the pay funded by the employer. The employee’s total pay in this example is £1,200 in respect of 1 to 15 April and £1,200 (made up of £960 grant-funded pay and £240 employer-funded pay) in respect of 16 to 30 April, totalling £2,400.

1. £2,400 minus £732 (the amount of pay minus the relevant National Insurance contributions secondary threshold)
2. Multiply by 13.8% (this gives you the amount employer National Insurance contributions due on an employee’s total pay for the pay period)
3. Divide by 30 (the number of days in the pay period)
4. Multiply by 15 (the number of furlough days in the pay period) Step 5: Multiply by £960 / £1,200 (this is the furlough pay received for the furlough period divided by the total pay received for the furlough period) – this equals £92.07

A Ltd can claim £92.07 in respect of the employer National Insurance contributions due on the employee’s March pay. The total grant for employer National Insurance contributions cannot exceed the total amount of employer National Insurance contributions due to be paid.

Before you claim for employer National Insurance contributions

Employer National Insurance contributions is payable on all pay over the secondary threshold at a rate of 13.8%. Employers may be eligible for the Employment Allowance. In the 2019 to 2020 tax year the allowance was £3,000 and was available to all employers. From 6 April 2020 the Employment Allowance is £4,000 but is only available to employers whose Employer Secondary National Insurance contributions liability in the previous year was under £100,000.

Employers can use the Employment Allowance to reduce their employer National Insurance contributions bill across each payroll until the allowance is exhausted or the end of the tax year, whichever comes first.

No employer National Insurance contributions due

If there is no employer National Insurance contributions due then the amount of the grant towards employer National Insurance contributions is zero. This could be the case for:

• apprentices under 25 (category H)
• employees under 21 (category M)
• employees under 21 who can defer NI because they’re already paying it in another job (category Z)
• employers whose employer National Insurance contributions bill is reduced to £0 by the Employment Allowance

Work out how much you can claim for employer’s pension contributions

You’ll still need to pay pension contributions on behalf of your furloughed employees, and you can claim for these up to the level of the mandatory employer contribution, even if it’s not an auto-enrolment pension.

You cannot claim for any pension contributions:

• if there are no contributions made, or due to be made for an employee
• you make that are above the mandatory employer contribution

You’ll need to work out how much you can claim for employer’s pension contributions.

1. Start with the amount you’re claiming for the employee’s wages.
2. Deduct the minimum amount your employee would have to earn in the claim period to qualify for employer pension contributions – this is £512 a month for periods before 5 April 2020, and £520 a month for periods after 6 April 2020.
3. Multiply by 3%.

Grants for pension contributions can be claimed up to this cap provided the employer pays the whole amount claimed to a pension scheme for the employee as an employer contribution.

Example if employee is furloughed for the whole pay period, and you do not top up their pay

A Ltd pays employees on a monthly basis. An employee was furloughed on 1 April 2020 and is paid £1,500 of furlough pay on 30 April 2020. A Ltd did not top up the employee’s pay. A Ltd pays employer pension contributions into the employee’s pension.

1. Start with £1,500 (this is the gross pay grant)
2. Deduct £520 (this is the Lower Level of Qualifying Earnings)
3. Multiply by 3% = £29.40

A Ltd can claim £29.40 towards employer contributions it makes into the employee’s pension.

Example – employer makes contributions above the minimum level of contributions for an auto-enrolment pension

A salaried employee of A Ltd earns £2,125 per month, and is furloughed from 1 May 2020 to 31 May 2020. A Ltd has agreed to top up the employee’s salary to its usual amount, including making employer pension contributions which are usually 3% of the employee’s entire salary. The amount of gross pay grant is 80% of £2,125, which is £1,700.

The grant that can be claimed towards the employer pension contributions is the lower of the minimum level of contributions for an auto-enrolment pension, based on the furlough payment, and the amount actually paid by A Ltd.

The minimum level of auto-enrolment contributions is:

1. Start with £1,700 (this is the gross pay grant)
2. Deduct £520 (this is the Lower Level of Qualifying Earnings)
3. Multiply by 3% = £35.40

The total employer pension contribution made by A Ltd under the terms of the pension scheme is the gross pay to the employee of £2,125 multiplied by 3%, which equals £63.75.

As A Ltd can only claim the lower of the minimum level of contributions for an auto-enrolment pension (based on the furlough payment) and the amount actually paid into the employee’s pension, they can claim £35.40 to cover employer pension contributions.

Example of how to calculate the grant towards employer pension contributions where the employee is furloughed during the pay period

Where an employee is paid for a pay period where only some of the days are furlough days then the Lower Level of Qualifying Earnings should be apportioned on a daily basis.

A Ltd pays employees on the last day of every month. A Ltd pays employer pension contributions into employees’ pensions in line with the minimum level of contributions for an auto-enrolment pension.

An employee agrees to be furloughed from 16 April 2020.

Their April 2020 gross pay is £1,501.20. This is made up of £810 which they earned before being furloughed, and £691.20 of furlough pay.

The amount of the grant which A Ltd can claim towards their employer pension contributions is:

1. Start with £691.20 (this is the furlough pay)
2. Deduct £260 (this is a proportion of the Lower Level of Qualifying Earnings)
3. Multiply by 3% = £12.94

The minimum level of auto-enrolment pension contributions on the furlough pay is £12.94.

A Ltd can claim for the lower of £12.94 or the employer pension contributions due on the furlough pay under the terms of the pensions scheme. in respect of the furlough pay.

The Lower Level of Qualifying Earnings in this example is calculated as £520 divided by 30 days (the number of days in April), and then multiplied by 15 days (the number of days that the employee is furloughed in April).

How to claim

The online service you’ll use to claim will be available on 20 April 2020. You cannot make a claim yet.

You can only claim for periods when your employee was on furlough.

You cannot make more than one claim during a claim period – you should make your claim shortly before or during running payroll.

You must claim for all employees in each period at one time – you cannot make changes to your claim.

You can make your claim in anticipation of an imminent payroll run, at the point you run your payroll or after you have run your payroll . Claims can be backdated from 1 March 2020 where employees have already been furloughed from that date. A claim cannot start any earlier than the date the employee was first furloughed.

You must pay the full amount you are claiming to your employee, even if your company is in administration. If you’re not able to do that, you’ll need to repay the money back to HMRC. The same applies in relation to employer national insurance contributions and pension contributions you claim regarding your employee. The full amount you claim in respect of these must be paid or you will need to repay the money back to HMRC.

By making a claim, you agree that:

• the grant you receive can only be used to pay your employee’s salary and the employer national insurance contributions and pension contributions you must pay in relation to the salary paid to your employee
• you will return any grants back to HMRC immediately if you’re unwilling or unable to use it to pay your employee’s salary and the employer national insurance contributions and pension contributions

You must not make the claim if you do not accept that you can only use the money you claim for making those payments and that it must be returned to HMRC if you do not.

After you’ve claimed

HMRC will check your claim, and if you’re eligible, pay it to you by BACS to a UK bank account.

You must pay the employee all the grant you receive for their gross pay in the form of money.

Furloughed staff must receive no less than 80% of their reference pay (up to the monthly cap of £2500).

Employers cannot enter into any transaction with the worker which reduces the wages below this amount. This includes any administration charge, fees or other costs in connection with the employment.

When the government ends the scheme

When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).

Tax Treatment of the Coronavirus Job Retention Grant

Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.

Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.

Individuals with employees that are not employed as part of a business (such as nannies or other domestic staff) are not taxable on grants received under the scheme. Domestic staff are subject to Income Tax and National Insurance Contributions on their wages as normal.

How to treat grant payments in RTI

You must report the amount of grant you receive and pay to an employee through RTI, in the same way you would report their normal pay.

You should make RTI submissions on or before the date you pay your employee.

Where employers have continued to pay employees during a period of furlough, in advance of receiving any payments under the scheme, they do not need to make any further RTI submissions when they receive the grant that reimburses those payments made in advance.