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Salary or bonus?

2019-11-01T21:15:38+00:00November 9th, 2019|Categories: Blog, PAYE|Tags: , , , |

As 31 December approaches, many companies will be getting ready to tie up tax matters for their financial year-end and giving consideration to salaries, bonuses and dividends. Given current tax rates, paying a dividend rather than a salary will often be a more cost-effective way of withdrawing profits from a company. However, if the company is loss-making and has no retained profits, it will not be possible to declare a dividend, and an alternative will need to be considered. This often involves an increased salary or a one-off bonus payment. From a tax perspective, the position will be the same [...]

Employment allowance

2019-08-23T16:22:32+01:00August 9th, 2019|Categories: Blog, PAYE|Tags: , , , |

The employment allowance (EA) was introduced from April 2014, potentially cutting every employer’s NIC payments by allowing businesses and charities to offset up to a pre-set annual threshold (£3,000 from April 2016, previously £2,000) against their employer PAYE NIC liabilities. Employers may generally claim the EA if they are a business (including a Community Amateur Sports Club) that pays employer Class 1 NICs on employees’ or directors’ earnings and is not funded by central government or a charity. To keep the process as simple as possible for employers, the EA is delivered through standard payroll software and HMRC’s real [...]

The correct way with directors’ NICs

2019-08-23T16:22:52+01:00August 4th, 2019|Categories: Blog, PAYE|Tags: , , , |

In certain situations the non-cumulative nature for calculating employee Class 1 National Insurance Contributions (NICs) makes it possible to manipulate earnings to reduce the overall amount payable by taking advantage of the lower rate of primary Class 1 contributions payable once the upper earnings limit has been reached. This means that that an employee who is paid £2,000 each month of the year will pay considerably more in primary contributions than someone who is paid £600 for 11 months and £23,400 for one month, even though their total earnings for the year are the same. Company directors often have [...]

Reporting expenses and benefits for 2018/19

2019-09-02T11:28:50+01:00June 27th, 2019|Categories: Articles & Guides, Blog, PAYE|Tags: , , , , |

Where employees were provided with taxable benefits and expenses in 2018/19, these must be notified to HMRC. The reporting requirements depend on whether the benefits were payrolled or not. Benefits not payrolled Taxable benefits that were not payrolled in 2018/19 must be reported to HMRC on form P11D. There is no need to include benefits covered by an exemption (although take care where provision is made via an optional remuneration arrangement (OpRA)) or those included within a PAYE Settlement Agreement. Paid and reimbursed expenses can be ignored to the extent that they would be deductible if the employee met [...]

Are you paying the minimum wage?

2019-09-02T11:27:54+01:00June 23rd, 2019|Categories: Articles & Guides, Blog, PAYE|Tags: , , , , |

The National Living Wage (NLW) and National Minimum Wage (NMW) increased from 1 April 2019. From that date, the NLW, payable to workers aged 25 and over, is set at £8.21 per hour. Workers under the age of 25 and over school leaving age must be paid the NMW appropriate for their age. From 1 April 2019, this is £7.70 per hour for workers aged 21 to 24, £6.15 per hour for workers aged 18 to 20 and £4.35 for workers above school leaving age and under 18. A separate rate of £3.90 per hour applies to apprentices under [...]

PAYE settlement agreements

2019-08-23T16:17:07+01:00June 21st, 2019|Categories: Articles & Guides, Blog, PAYE|Tags: , , , |

A PAYE Settlement Agreement (PSA) enables the employer to pay the tax and National Insurance instead of the employee on those benefits and expenses included within the PSA. This can be useful to preserve the beneficial nature of the benefit, for example in respect of a Christmas or other function falling outside the associated exemption, or where the effort involved in reporting the benefit on individual employees’ P11Ds is disproportionate to the amount involved. What can a PSA be used for? A PSA cannot be used for all benefits – only for those which fall into one of the [...]

New NIC treatment of termination payments

2019-09-02T11:22:57+01:00June 12th, 2019|Categories: Blog, PAYE|Tags: , , , , |

The National Insurance Contributions Bill was introduced into Parliament on 25 April 2019. The Bill contains provisions designed to align the income tax and national insurance contributions (NICs) treatment of termination awards and sporting testimonials, closing a loophole which currently allows effective tax planning. If enacted, the new rules are expected to take effect from April 2020. HMRC believe that 'the current misalignment incentivises well advised employers to disguise final payments as compensatory termination payments that benefit from a NICs exemption'. Consequently, the new provisions will affect businesses that structure termination payments to reduce the tax and NICs liability with [...]

Minimum workplace pension contributions rise

2019-09-02T11:22:22+01:00May 3rd, 2019|Categories: Blog, PAYE|Tags: , , |

The minimum contributions employers and their staff must pay into their automatic enrolment workplace pension scheme increased with effect from 6 April 2019. From that date, the employer minimum contribution has risen from 2% to 3%, while the staff contribution also increased from 3% to 5%. As part of the 'phasing' process, the increases mean that total contributions for employees have gone up from 5% to 8%. All employers with staff in a pension scheme for automatic enrolment must ensure that they implement the changes and ensure that at least the new minimum amounts are being paid into their pension [...]

National Minimum Wage Increases from 1st April 2019

2019-09-02T11:22:15+01:00March 29th, 2019|Categories: PAYE|Tags: , , , |

New rates for the National Minimum Wage (NMW) take effect from 1 April 2019, and employers must ensure that they implement them accordingly. The rates are as follows: 25 and over - £8.21 per hour; 21- to 24-year-olds - £7.70 an hour; 18- to 20-year-olds - £6.15 an hour; 16- to 17-year-olds £4.35 an hour; and Apprentice rate - £3.90 an hour. The increased NMW penalty took effect from 1 April 2016 and applies to any notice of underpayment relating to a pay reference period beginning on or after that date. Broadly, the penalty percentage which may be imposed [...]

Employer responsibilities for tips

2019-09-02T11:22:04+01:00March 16th, 2019|Categories: Blog, PAYE|Tags: , , , , |

The tax and NIC treatment of tips will depend on how they are paid to the recipient. Cash tips handed to an employee, or say, left on the table at a restaurant and retained by the employee, are not subject to tax and NICs under PAYE, so there is not responsibility for the employer to keep track of them and deduct tax or NICs. The employee is however, obliged to declare the income to HMRC and pay the tax and NICs due. By contrast, if the employer passes tips to employees that are either handed to him (or the [...]

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