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National Insurance

Changes to National Insurance
Changes to National Insurance 758 513 Stepping Stones Accountancy

Changes to National Insurance

National Insurance (NI) is a government initiative where contributions are paid by employers, employees and self-employed. The payment is used for various state benefits and services such as the NHS (National Health Service), state pensions, benefits to be drawn by unemployed and other social security aspects.

Contributors of National Insurance are individuals who are employed or self-employed and earning above a specific income threshold. These contributors fit into 4 classes:

  • Class 1 – Employed and employers
  • Class 2 – Self-employed individuals
  • Class 3 – Voluntary contributions from individuals to cover any gaps in their NI which allows them to qualify for certain benefits
  • Class 4 – Extra contributions from self-employed because of an increase in profits

The contribution of NI is calculated based on earnings and employment status. For employees, payment is deducted directly from their salary by the employer via their PAYE (pay as you earn) system. Self-employed professionals will pay their contributions through their self-assessment tax return.

This year the Government have introduced several changes to NI contributions with the focus of reducing the financial burden to employees and self-employed. Here is a summary of the changes:

Class 1 NIC – For Employees

As of 6th January 2024, the rate of NIC for Class 1 which was paid by employees decreased from 12% to 10% on earnings between £12,570 and £50,270. It is estimated that the reduction will save employees up to £450 annually after their tax payments.

Class 4 NIC – For Self-Employed

On 6th April 2024 the main rate of NIC for Class 4 was reduced from 9% to 6%. Also, any self-employed individuals where profits are above £12,570 no longer need to pay Class 2 NICs but will retain access to contributory benefits such as state pension. For any self-employed individuals with profits between £6,725 and £12,570 they will receive NI credits.

There are several considerations to highlight:

  • It is important that employers update all their payroll systems to reflect these changes. This can involve changes with software updates (for online accounting tools) and administration adjustments.
  • All employees must be kept up to date with these changes (many will not be aware of them). The most popular method for this is to explain the reductions in NI on an employee’s monthly payslip.
  • There can be some special rules that apply for Directors, it is recommended to seek expert accountancy advice to understand these in more details.

In summary all these changes have been designed to help employees take more money home. Whilst also simplifying the tax process for the self-employed and helping to maintain their entitlement to benefits.

If you have any questions regarding national insurance contributions, then our team can offer both help and support. Please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.

You can also book a free 20-minute call with Yarka – https://calendly.com/yarka-ssa/20min

Understanding the P11D | Accountancy Help with P11D | What is a P11D | Purpose of a P11D
Understanding the P11D 758 513 Stepping Stones Accountancy

Understanding the P11D

A business that employs staff will have several payroll responsibilities. One area which is often misunderstood or overlooked is the need to file a P11D. In this blog we will explore exactly what its purpose is and why it is needed.

The purpose of a P11D

If a business has set-up perks for their employees such as private medical, company car or leisure memberships, then this is considered a ‘benefit in kind’ and a P11D form should be submitted. The phrase ‘benefit in kind’ relates to any form of perk which holds a monetary value and is not a necessary essential to enable an employee to complete their job. These benefits must be declared as they are taxable and need to be considered for PAYE deductions.

Thus, the P11D acts as a declaration of benefits given to an employee during the Tax Year. HMRC will then use this information to calculate the National Insurance applicable to the individual employee.  A business must ensure they incorporate the P11D submittal as part of their payroll obligations.

When does a P11D need to be submitted?

The submittal for a P11D is always based on the financial year. Once the tax year is completed a business will then have up until 6th July to complete the necessary paperwork.

If we focus on the 2022/23 tax year, then a P11D will need to be submitted no later than 6th July 2023 and for payment, if this is made electronically, then the deadline is 22nd July 2023.

Who is responsible for the P11D

It is the employer’s responsibility to ensure that a P11D is completed and submitted for every employee that is receiving ‘benefits in kind’.

There are however, 2 instances where a submission is not required. Firstly, if the employee does not receive any benefit during the financial year, for example they might have chosen to no longer have a company car, then no benefit in kind is received and no P11D submission is needed. Secondly, if a business is paying tax on the benefits through its payroll, they can then inform HMRC using a P11D(b) as a more simple way to identify National Insurance contributions.

Any P11D submission should be filed electronically either via the HMRC PAYE online service or a HMRC approved payroll software solution. Details to be declared on the submission will include full company details, relevant employee details, benefits received and relevant value of these benefits.

As a business what else do I need to know?

  • If a business misses the filing deadline, then HMRC may issue fines in the region of £100 per month.
  • Upon submittal of the P11D, every employee this relates to should be given a copy.
  • Always keep accurate records which can be referred to after submission.

If you have any questions or need some help with a P11D submission, please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk. You can also book a free 30-minute call with Yarka – https://calendly.com/yarka-ssa/30min

How Is Payroll Changing | Business Payroll Support | Payroll Help Bristol
How is payroll changing? 758 513 Stepping Stones Accountancy

How is payroll changing?

Change is such an important buzz word at the moment. With the tragic news of the loss of Her Majesty we now see a new King at the helm. Alongside this we have also seen a major change at Number 10 with a new Prime Minister also being introduced.

The political landscape in the UK has been turbulent for several months now and it is hoped that a more settled and calm approach is ahead. As expected, when a new cabinet is introduced, those in charge must try to quickly make a positive impression and change is inevitable.

As an accountancy firm, obviously, we monitor very closely any changes that happen in the Cabinet to make sure that we understand the impacts this may have. Something which has already been identified is a change in payroll. Plans were almost immediately announced for taxes to be cut with a proposal to reverse the increase in NI (national insurance) from November 2022 and scrap the planned increase in corporation tax.

When items such as NI and corporation tax are changed, the implications to payroll can be complex. Staying on top of this from a business perspective is mind boggling and this is where the reliance on specialists, who can translate the jargon into plain English, is so important. We saw in July when the last NI change was introduced what a storm it caused, especially at a time when cost of living rates was justifiably causing concern.

With the proposed reversals and changes, it is inevitable that some problems will be experienced. The key will be to let the experts digest it and then consult with them when needed. A similar concept to when a new piece of software is introduced, first the experts test it, then the features are promoted and finally it is rolled out for all to benefit from.

As the transformations in Government continue to settle over the coming months, the one thing that everybody can be assured of is that change will continue to happen. Our team of specialist accountants will continue to monitor the situations and will keep everybody updated.

If you have any questions or need a little help please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk. You can also book a free 30-minute call with Yarka – https://calendly.com/yarka-ssa/30min

Renting home office space to your company | Home Office Accountant Advice | Advice on Home Office Set-Up | Accountancy Support Bristol
Renting home office space to your company 758 513 Stepping Stones Accountancy

Renting home office space to your company

The last few years have seen more of us working from home and although life is slowly returning to normal, many organisations have realised there are many benefits of home working and are encouraging staff to make this change, whether full or part time, more permanent.

Naturally this change in work location incurs additional costs and this is recognised by HMRC with their work from home allowance. Whilst this allowance enables people to reclaim a proportion of the costs of running a home office, it does not allow directors of companies to claim for a percentage of their rent or mortgage interest charges.

To mitigate this, directors are entitled to charge rent to their company for the use of their property, with this then being declared as commercial rent on the directors’ personal tax return and enabling them to also declare a proportion of costs.

It is essential that a rental agreement is put in place between the director and the company so that the director can become the landlord and in turn charge commercial rent. If the rent is charged at the same rate as the costs, then income offsets costs and thus no rental profit needs to be declared. As rental income is not subject to National Insurance many see this as a cost-effective way to release money from your business.

Prior to setting up a formal rental agreement there are some elements that must be considered:

  • Will your mortgage provider/landlord allow you to enter into the agreement and how will it affect your home insurance?
  • Ensure that the agreement only covers trading hours as it is normal for a home office to be utilised for personal use outside of these hours.
  • The proposal to put an agreement in place must be evidenced in the board minutes and cannot be backdated.
  • The agreement must be in joint names if the property is joint owned.
  • Rental costs may include service charges for a proportion of heating, light and power costs.
  • The rental cost must not exceed local commercial rental values, or it may be deemed by HMRC as disguised distributions.
  • The director must genuinely work from home and be able to evidence the costs that are being claimed for.
  • If you are leasing a substantial part of your property or separate buildings then a formal lease agreement would be more appropriate and this must be drawn up with the help of a solicitor as it would be covered by the Landlord and Tenant Act and would have implications for Capital Gains Tax and Business Rates.

If you have any questions or need some accountancy help, please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk. You can also book a free 30 minute call with Yarka – https://calendly.com/yarka-ssa/30min

Adjusting a CJRS claim for Employment Allowance | CJRS Advice Bristol | Covid-19 Business Support Bristol
Adjusting a CJRS Claim for Employment Allowance 758 513 Stepping Stones Accountancy

Adjusting a CJRS Claim for Employment Allowance

The Coronavirus Job Retention Scheme (CJRS) has been set-up by the Government to enable companies to claim up to 80% of an employee’s wages plus any National Insurance or pension contributions during the coronavirus crisis. However, many companies have been left wondering what impact this new scheme might have on their ability to claim Employment Allowance (EA).

In order to provide clarity to the situation, HMRC have recently confirmed that the rules for claiming and applying for EA WILL NOT change as a result of a claim under the new CJRS for Class 1 National Insurance (NI) costs.

Those employers who are eligible can continue to utilise the EA scheme to pay a reduced amount of NIC until their allowance runs out or until the end of the tax year, whichever is soonest. (Currently the employment allowance scheme enables eligible employers to reduce their annual NI liability by up to £4,000). Eligibility applies to a business or charity where their NI liabilities were less than £100,000 in the previous tax year.

In order to calculate how much National Insurance Contributions an employer can claim back through the scheme, they simply need to subtract any EA that is used in a specific pay period. If the employer finds that the amount of EA being claimed will not cover the total employer NIC which is due, then grants are available.

If an employer chooses to delay their EA claim and as such they have employment allowance that is unused at the end of a tax year, then they can use it to reduce other tax costs.

It is important to note that any business needs to make sure they are not receiving relief for the same costs twice, as this can be considered as fraud and may result in claims being investigated. This is where it is best to consult with full qualified accountant who will be able to provide advice, guidance and support for such matters.

If you have any questions or need some assistance then please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk

Spring Budget 2017 Tax Summary 640 289 Stepping Stones Accountancy

Spring Budget 2017 Tax Summary

Highlights

  • Class 4 National Insurance paid by the self-employed to rise to 11% by April 2019.
  • Dividend allowance to fall from £5,000 to £2,000 in April 2018.
  • Corporation Tax decrease to 19% in April 2017 and to 17% in 2020 confirmed.
  • Some small businesses and landlords given extra time to prepare for Making Tax Digital.
  • Pubs with a rateable value of less than £100k will get a £1,000 a year rates discount.

National Insurance

Class 4 National Insurance paid by the self-employed was announced to increase from 9% to 10% in April 2017 and to 11 in April 2018. Class 4 National Insurance is paid on profits earned over £8,060. The change will affect 2.84 million people with an average annual increase of £240.

The newly announced change in Class four also coincides with an announcement in an earlier budget that class 2 is to be abolished in April 2017. Class 2 was a flat rate of £145.60 annually in 2016/17 and was payable where profit exceeded £5,965.

The net effect is that the self-employed with profits of more than £16,250 will see an increase in the National Insurance they pay.

The government have sold the tax rise on a platform of fairness as the employed pay Class 1 National Insurance at a current rate of 12%. But the employed are entitled to more government benefits and there has been no talk of making this equal.

Dividend Allowance

A new tax on dividends was introduced in April 2016 and it came with a £5,000 dividend allowance. It was announced in the budget that from April 2018 the dividend allowance will be reduced to £2,000. For small company owners who receive most of their income as dividends this will cost them an extra £225 in tax per year.

Most small company owners have yet to prepare a tax return and see the effect of the new dividend tax. This announcement is clearly aimed at increasing the tax take from small business owners even more.

Corporation Tax

The chancellor has committed to the decreases announced on Corporation Tax meaning a reduction from 20% to 19% in April 2017 and further decrease in 2020 to 17%. This goes someway to offsetting the Dividend Tax and the reduction in the Dividend Allowance.

Making Tax Digital

Making Tax Digital is the government programme to abolish tax returns and replace them with automatic data collection and a quarterly reporting structure. The plans are highly controversial and have been criticised by the accounting profession and small business groups.

There was a bit of relief announced for the smallest businesses and landlords in that they will be delayed by a year to April 2019. This is welcome news to help the smallest businesses prepare for the change from an annual tax return to quarterly reporting of their profit.

Rates

Pubs with a rateable value of less than £100k are to get an annual discount of £1,000 on their rates. The net effect of the rates rise and the discount could still see some pubs paying an increase in rates but the impact will be reduced and some pubs could even see a fall in rates.

A cap in rate rises has been introduced for those losing small business rate relief they will see their rates increase by no more than £50 per month.

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