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NI

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

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

Translating The Accountancy Jargon | Accountancy Terminology |
Translating the accountancy jargon 758 513 Stepping Stones Accountancy

Translating the accountancy jargon

People usually go into business because they feel that they have something special to offer; a unique skill set or product that the market needs and a desire to offer the very best customer service to complement that offering.

Whether you are gifted at capturing the perfect photograph, capable of building distinct websites or have a unique talent for developing flavour combinations for that favourite of lunchtime foods, the humble sandwich, you are a specialist for a reason and you are no doubt passionate about what you do. However, as business owners there are lots of areas that you are not a specialist in. For example, apart from a web developer few people need to understand what CMS means or apart from a photographer only a small number of people will understand what the use of bokeh is. There are so many business acronyms and technical terms that we will probably never fully understand and perhaps have no need to understand.

If we look at the world of accountancy, how many people really know their accruals from their capital gains or their liabilities from their overheads?  To help you navigate the plethora of phrases commonly used in accountancy, here is an A to Z of some of the most popular ones and what they actually mean:

Accrual – an expenditure that has not yet been paid for or invoiced
Balance Sheet – a summary of the assets and liabilities within the business
Capital Gain – the profit that you make on the sale of asset which is purchased and used within the business (rather than sold on)
Depreciation – the devaluing of an asset purchased within the business
Equity – the value of the business to its shareholders
Fixed cost – a recurring cost that remains the same for a dedicated period of time
Goodwill – the intangible asset associated with the value of a business, e.g.  goodwill, brand recognition, copyrights, trademarks, customers, etc
HMRC – Her Majesty’s Revenue & Customs, the UK’s tax, payments and customs authority
IFRS – the accounting standards set by International Financial Reporting Standards
JSA – job seekers allowance is the money paid to people who are unemployed but that are actively seeking work
Kashflow – one provider of the many solutions for online accounting software
Liabilities – either money or debt which the business owes and results in funds quickly coming out of the business
MTD – a HMRC scheme called Making Tax Digital which is focussed on digitalising the tax system
NI – known as National Insurance which is a payment made by everybody who is employed with a salary over £9,500
Overheads – the fixed costs which do not relate to sales, e.g., rent, fees and depreciation
P45 – a formal document issued to an employee when they leave the company
Quarterly – accountancy processes that need to be completed four times a year e.g., VAT returns and MTD updates
Retained Profit – the sum of all profits when all taxes and dividends have been taken out of the business
Self Assessment Tax Return – personal tax used by HMRC to collect relevant income tax payments
Tax Planning – the process which can be completed to help reduce the burden of large tax payments
UTR – this will be a 10-digit number (known as the Unique Taxpayer Reference) which is given to self-employed professionals for either self-assessment or setting up limited companies
VAT – the tax payments that needs to be made on business purchased (also known as Value Added Tax)
Worker – the newest phrase predominantly used in the ‘gig economy’ for a person’s employment status
Xmas Party Tax Relief – for annual events such as a Christmas party there are tax free benefits as long as the costs is no more than £150 per person
Year End – the closing period of a business’s accounting year
Zero Rate – all goods that are rated zero rate means not VAT is applied to their cost

If you have any questions or unsure about any other accountancy terminology then please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.

Contractors and Construction Industry Scheme | Accountancy Advice
Contractors and the Construction Industry Scheme 758 513 Stepping Stones Accountancy

Contractors and the Construction Industry Scheme

The Construction Industry Scheme (CIS) requires contractors to deduct payments from any subcontractors that they use in order to make advance payments towards the subcontractor’s tax and National Insurance.

It is a legal requirement that all contractors register for the scheme, whether a sole trader or a limited company, if:

  • they pay subcontractors to do construction work
  • their business doesn’t do construction work but usually spends more than £1 million a year on construction

There are a number of professions within the construction industry though who are exempt from the CIS including architecture, surveying, planning and civil/structural engineers. Such peculiarities can make the scheme a little tricky to understand.

For those companies who are required to register though there are some very specific guidelines that must be followed:

  • they must register for CIS before taking on their first subcontractor
  • they must check if they should employ the person instead of subcontracting the work. There may be a penalty if they should be an employee instead
  • they must check with HM Revenue and Customs (HMRC) that their subcontractors are registered with CIS
  • when paying subcontractors, they usually need to make deductions from their payments and pay the money to HMRC.
  • they need to file monthly returns and keep full CIS records – they may get a penalty if they don’t
  • they must let HMRC know about any changes to their business

Whilst more information is available from GOV.UK , the rules surrounding the Construction Industry Scheme can be somewhat confusing so it always best to get professional advice if you are unsure.

At Stepping Stones we work with many companies within the construction industry and as such are well placed to provide advice and guidance to both contractors and subcontractors. Why not give us a call and see how we can help you, we would be delighted to work with you.

 

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