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The Coronavirus Job Retention Scheme (CJRS) is changing

2020-06-02T23:22:51+01:00June 3rd, 2020|Categories: COVID-19, PAYE|Tags: , , , , , |

UK Chancellor Rishi Sunak outlined changes to the furlough scheme during the daily press briefing (29 May 2020). The Chancellor stated that in June and July the furlough scheme will continue as before, but employers will be asked to cover National Insurance and employer pension contributions in August. By September, businesses will pay 10% of wages for furloughed staff, and in October 20%, the UK chancellor said. This means the subsidy will taper off from August, with businesses expected to pay a greater share of their staff salaries, starting with covering National Insurance and pension contributions. From September the [...]

Profit extraction in 2020/21 – What is the optimal salary?

2020-04-01T20:00:49+01:00April 15th, 2020|Categories: Blog, Limited Company, PAYE|Tags: , , , , , |

A popular tax-efficient profit extraction strategy used by personal and family companies is to take a small salary and extract further profits as dividends. Where this approach is adopted, the starting point is to determine the optimal salary. While this will depend on personal circumstances and there is no excuse for not doing the sums, there are some general guidelines. Where the director does not have the requisite 35 qualifying years to provide access to the full single tier state pension paying a salary at least equal to the lower earnings limit for Class 1 National Insurance purposes (set [...]

Increased National Minimum Wage rates from April 2020

2020-02-11T22:17:18+00:00February 14th, 2020|Categories: Blog, PAYE|Tags: , , , |

Some three million workers are set to benefit from increases to the National Living Wage (NLW) and minimum wage rates for younger workers from 1 April 2020. The compulsory NLW is the national rate set for people aged 25 and over. The NLW is enforced by HMRC alongside the national minimum wage (NMW), which they have enforced since its introduction in 1999. Generally all those who are covered by the NMW, and are 25 years old and over, will be covered by the NLW. These include: - employees; - most workers and agency workers; - casual labourers; - agricultural [...]

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 [...]

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