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Thread: Income Tax, NI and the Coronavirus Job Retention Scheme payment

  1. #1
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    Income Tax, NI and the Coronavirus Job Retention Scheme payment

    There is potential in the coming days for my employer to put me on furlough and I am calculating the financial impact this would have on me.

    I would be paid the maximum grant of £2,500 from the Coronavirus Job Retention Scheme, which would then be subjected to income tax and NI.

    What I do not understand is how that income tax and NI would be calculated. Can anyone explain how this would be calculated, or will existing tax codes apply?

  2. #2
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    In a similar position, furlough started for me yesterday and only told by email on Friday (last week). Im fortunate in that my employer will top up my salary from the 80% for the first four weeks, after that............

  3. #3
    I haven’t read in detail, but it looks like it is paid to you by your employer via payroll, in the same manner as your normal salary was prior to becoming a furloughed employee. On that basis I imagine that existing PAYE code would apply.

    https://www.icaew.com/insights/viewp...lough-guidance
    Last edited by gbn13; 31st March 2020 at 17:10.

  4. #4
    Master mr noble's Avatar
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    Me too. Told yesterday that I’m furloughed as of today.

    As I understand it, you will pay the tax and NI as per the normal rules if you earned £2500 a month.

    Seems fair enough to me.

    Unbelievable times!

  5. #5
    sorry about the formatting, but this is a very good guide

    Subject: FW: FAQs on Job Retention Scheme
    CORONAVIRUS JOB RETENTION SCHEME
    · Any large or small employer can apply to put workers on temporary leave or “furloughed” status.
    The government will then pay them cash grants of 80 per cent of their wages up to a cap of £2,500,
    providing they keep the worker employed.
    · They will receive the grant from HMRC. All UK organisations can self-certify that it has furloughed
    employees. The scheme will cover the cost of wages backdated to March 1. All UK-wide employers with
    a PAYE scheme will be eligible, including the public sector, local authorities and charities.
    · The scheme will be open initially for at least 3 months. But we will extend it for longer if necessary.
    There is no limit on the amount of funding available for the scheme.
    · We expect the first grants to be paid within weeks. HMRC are working night and day to get the
    scheme up and running and we’re aiming to get it done before the end of April. Existing systems are not
    set up to facilitate payments to employers.
    Do individuals still have to pay tax on this?
    · Yes – individuals will pay Income Tax and National Insurance on any payments received through this
    scheme as they are replacement for income in line with normal practise for benefits or grants that replace
    income.
    Will this cover the cost of employer National Insurance contributions and employer pension contributions?
    · Yes – employers will be able to apply for a grant to cover the Employer National Insurance contributions
    and minimum automatic enrolment pension contributions on paying the lower of 80% of regular salary or
    £2,500 per month.
    How will this work for those on zero-hour/flexible contracts/agency workers?
    · This scheme aims to support all those employed through the PAYE system regardless of their
    employment contract, including those on zero-hour contracts.
    · Zero-hour and flexible contracts can cover a whole range of working arrangements.
    · The 80% grant is applied to the higher of: (1) the earnings in the same pay period in the previous year; or
    (2) the average earnings in the whole previous 12 months (or fewer if they have worked for less time than
    this, including a part month calculation if they were taken in February).
    Can a business furlough someone after hearing the announcement and then claim back to March 1st even
    though they had been working that whole time?
    · No – the scheme is backdated to March 1st with a view to covering those who have already been made
    redundant as a result of the coronavirus.
    What about employees taken on after 1 March?
    · They are excluded from the scheme.
    To qualify, does the business need to be ‘essential’?
    · No, all businesses which employ and pay workers through the PAYE system are eligible.
    Why are you not supporting me if my hours are reduced?
    · The scheme is designed to help those who otherwise would have been made unemployed.
    · We recognise that some people will work fewer hours.
    · We have strengthened the welfare system to support those whose hours change including an increase to
    the UC standard allowance and the working tax credit basic element.
    · This builds on the initial package announced at Budget including enhancements to contributory
    employment support allowance, which will now be available from day 1and making advances for all new
    UC claimants available online with no requirement to attend a job centre.
    Why isn’t this supporting part-time working?
    · The scheme is designed to help those who otherwise would have been made unemployed.
    · The public health guidance is clear that people should stay at home unless they are a key worker.
    Can my employer top this up?
    · Yes. In order to qualify for the scheme, employers must pay their staff at least 80% of wages, up to the
    cap of £2,500 per month. It is up to them if they wish to top up the additional 20 per cent.
    What about employees that have already been made redundant?
    · The scheme will be back dated to March 1 with a view to covering those who have already been made
    redundant due to the Coronavirus outbreak.
    · If firms re-employ staff made redundant after March 1st, they are eligible to then be furloughed and the
    employer would qualify for the grant.
    Can my employer sack me while I’m on furlough? Is my employer allowed to sack me as soon as the
    furlough scheme comes to an end?
    · Yes, you can still be made redundant while on furlough or immediately after. There is no requirement to
    bring the employee back to work after the period of furlough. If an employee is made redundant during
    the period of furlough then grant payments will cease.
    · However, in both cases normal redundancy rules and protections will apply.
    · Where a business feels that redundancy is the only option, this must still follow the rules which include
    giving a notice period and consulting staff before a final decision is reached.
    · More information on redundancy can be found at: https://www.gov.uk/redundancy-your-rights.
    Can I be furloughed for a short period of time, e.g. a week or a couple of days, and then re-employed?
    · A worker must be furloughed for a minimum of 3 weeks for their employer to be eligible to claim under
    this scheme.
    · This is consistent with the public health guidance seeking to minimise the number of people outside of
    their homes on a regular basis. The scheme supports employers asking the maximum number of
    employees to remain at home during the coronavirus outbreak.
    · A clear minimum period also aids a clear definition of who is and who is not furloughed.
    Can I volunteer or do training whilst furloughed?
    · If you are furloughed you cannot work for your employer during this period.
    · You can volunteer or train, provided that this does not involve the manufacture or creation of an item or
    part thereof than can yield revenue for the company, the provisions of services to the company, or the
    provision of any service that can yield revenue for the company. Firms can require workers to undertake
    training from home, provided it meets the above.
    ,
    Dr Luke Evans MP | Member of Parliament for Bosworth
    House of Commons | London | SW1A 0AA
    w: drlukeevans.org.uk

  6. #6
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    Out of interest has anyone been asked/told that they will need to "take" some of their annual leave as part of their furlough?

  7. #7
    Master Grandiloquence's Avatar
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    Got the call today that a lot of us at our company may be furloughed. Will find out in the coming days whether I will be one of them or if I am to be part of the skeleton staff they are keeping on to ensure day to day stuff gets sorted.

  8. #8
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    Quote Originally Posted by DavidL View Post
    Out of interest has anyone been asked/told that they will need to "take" some of their annual leave as part of their furlough?
    I didn't think you could be forced to take leave as part of your furlough, individual circumstances may vary but that's my understanding.
    Last edited by fierbois16; 31st March 2020 at 18:46.

  9. #9
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    Quote Originally Posted by fierbois16 View Post
    I didn't think you could be forced to take leave as part of your furlough, individual circumstances may vary but that's my understanding.
    That's my understanding of it too through the information that has been passed on to us.

  10. #10
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    Quote Originally Posted by mr noble View Post
    Me too. Told yesterday that I’m furloughed as of today.

    As I understand it, you will pay the tax and NI as per the normal rules if you earned £2500 a month.

    Seems fair enough to me.

    Unbelievable times!
    That makes sense but in the short term your tax code is not going to change, right? So whilst things will all level out in the end over a period of time, in the short term people who are in tax brackets applicable above that figure would be taxed on the £2500 greater than others?

    My understanding is limited and I may be naive to certain processes so please call out my rubbish.

  11. #11
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    Quote Originally Posted by gbn13 View Post
    I haven’t read in detail, but it looks like it is paid to you by your employer via payroll, in the same manner as your normal salary was prior to becoming a furloughed employee. On that basis I imagine that existing PAYE code would apply.

    https://www.icaew.com/insights/viewp...lough-guidance
    So in that respect, in the short term at least, the net from the £2500 will vary wildly from person to person?

  12. #12
    I also read that unless your employer tops up, the employers NI comes out of the £2.5k too, so people will see a fair chunk less than £2.5k in their pocket. £2.5k minus employer NI, minus pension payment, minus employee NI, minus tax.

  13. #13
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    Quote Originally Posted by Brighty View Post
    I also read that unless your employer tops up, the employers NI comes out of the £2.5k too, so people will see a fair chunk less than £2.5k in their pocket. £2.5k minus employer NI, minus pension payment, minus employee NI, minus tax.
    I am seeing that there is a contribution to employers NIC on top of the £2500 up to £245. So from the employERs point of view £2745 is the total grant.

    So yes I agree with your assessment except it would be minus employer NI less £245 (if at the full £2500).

    Edit: I just used a PAYE calculator and employers NI in group A at £2500 is exactly £245 hence how they have arrived at that value. Therefore employers NI is null and void in this example I think.
    Last edited by Hammond; 31st March 2020 at 19:20. Reason: Employers NI

  14. #14
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    Quote Originally Posted by Brighty View Post
    I also read that unless your employer tops up, the employers NI comes out of the £2.5k too, so people will see a fair chunk less than £2.5k in their pocket. £2.5k minus employer NI, minus pension payment, minus employee NI, minus tax.
    I actually read that employer NI is on top. Happy to be corrected... do you have a link?
    Agree on the rest.

    We are eagerly waiting for further details...gone through the process of putting 20+ on furlough.

    Did not realise we would need to put them through payroll as normal until last week. Slightly uncomfortable needing to pay staff without knowing exactly what will be coming back from the government. And when!!

    I help run an SME business. This crisis is truly rocking businesses such as ours. Sad times...

    Sent from my SM-N950F using Tapatalk

  15. #15
    I saw some accountants work the figures and a salary of £37,500 or less means you will be pretty much as you were (assuming the employer tops up the 20%).

    The 20% hit is probably manageable as at home your discretionary spending is limited and you aren’t allowed to work.


    Sent from my iPhone using TZ-UK mobile app

  16. #16
    Quote Originally Posted by DavidL View Post
    Out of interest has anyone been asked/told that they will need to "take" some of their annual leave as part of their furlough?
    My employer had said this

  17. #17
    Master mondie's Avatar
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    You cannot take annual leave while furloughed because your employment is suspended. To enforce annual leave your employer needs to give you a period of notice that is twice the length of the leave you are being directed to take. If they give you less notice you then have a choice pm whether to comply or not, depending on how compliant you wish to be in the current panic.

  18. #18
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    Quote Originally Posted by DavidL View Post
    Out of interest has anyone been asked/told that they will need to "take" some of their annual leave as part of their furlough?
    My understanding is they can reduce your holiday on a pro rata basis. E.g if you get 24 days leave a year you would forego 2 days holiday for each month you are furloughed.

    I'm not furloughed but my employer has introduced a rule as of yesterday that we must use half of our annual leave entitlement in the first 6 months of this year.

  19. #19
    Quote Originally Posted by Boss13 View Post
    I actually read that employer NI is on top. Happy to be corrected... do you have a link?
    Agree on the rest.

    We are eagerly waiting for further details...gone through the process of putting 20+ on furlough.

    Did not realise we would need to put them through payroll as normal until last week. Slightly uncomfortable needing to pay staff without knowing exactly what will be coming back from the government. And when!!

    I help run an SME business. This crisis is truly rocking businesses such as ours. Sad times...

    Sent from my SM-N950F using Tapatalk
    I stand corrected. The guidance on www.gov.uk states employers NI is on top of the £2.5k. I read it wasn't about a week ago on some other site, before the gov.uk page existed.

  20. #20
    Master de30m's Avatar
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    so is it clear yet how this "grant" is repaid?

    I'm not sure I get how businesses who are effectively not trading can cover this gap in their revenues, when most other costs are also being maintained or only deferred

    and at present not available to apply for until end of April

  21. #21
    Quote Originally Posted by de30m View Post
    so is it clear yet how this "grant" is repaid?

    I'm not sure I get how businesses who are effectively not trading can cover this gap in their revenues, when most other costs are also being maintained or only deferred

    and at present not available to apply for until end of April
    The hope is either reserves or via a BILS from their bank if the banks get their act together. You would hope that most businesses could cover the March payroll and so will need cash for April payroll which the bank should be able to help with if the portal not up and running. Alternatively ask to pay the payroll late or part late although staff will have to agree this.

  22. #22
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    Quote Originally Posted by MB2 View Post
    The hope is either reserves or via a BILS from their bank if the banks get their act together. You would hope that most businesses could cover the March payroll and so will need cash for April payroll which the bank should be able to help with if the portal not up and running. Alternatively ask to pay the payroll late or part late although staff will have to agree this.
    I don't think they will have to necessarily agree to it actually. Given they are officially on unpaid leave. Suppose it depends upon what agreement was made with them. If it was to pay them 80% then the business may be snookered here. Our agreement was to put them unpaid. And repay them via government grant when and if that comes in.

    However. Wouldn't want to damage these staff so we will do everything we can to pay them even though nobody knows when the government cash will come through.

    We have tried accessing CBILS. A long process. Will be surprised if that cash comes in May never mind April. Or if at all!!

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  23. #23
    Quote Originally Posted by Boss13 View Post
    I don't think they will have to necessarily agree to it actually. Given they are officially on unpaid leave. Suppose it depends upon what agreement was made with them. If it was to pay them 80% then the business may be snookered here. Our agreement was to put them unpaid. And repay them via government grant when and if that comes in.

    However. Wouldn't want to damage these staff so we will do everything we can to pay them even though nobody knows when the government cash will come through.

    We have tried accessing CBILS. A long process. Will be surprised if that cash comes in May never mind April. Or if at all!!

    Sent from my SM-N950F using Tapatalk
    Reboot of the CBILS coming tomorrow from the chancellor. Main change is don't have to exhaust other banking products first plus a reducion in the PG requirement.

    • It will be easier for businesses to access the scheme as banks will no longer have to consider other banking products before they consider BILS, this was previously a mandatory condition of the scheme;
    • Personal Guarantees (PGs) on loans below £250k will be removed;
    • PG’s on loans above £250k will only apply to 20% of the loan as the government is underwriting the remaining 80%;
    • Interest rates after the first 12 months are to be kept at a ‘modest’ level.

    Business will still need to prove creditworthy but hopefully it will be more accessible for those that need it now.

  24. #24
    Master Grandiloquence's Avatar
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    Had it confirmed today, many of my colleagues and I have been furloughed. Employer making up the 20% shortfall and I'm quite positive we will all return to work eventually.
    Still, feels a bit weird!

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