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PAYE

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

Why change something if it is not broke
Why change something if it is not broke? 758 513 Stepping Stones Accountancy

Why change something if it is not broke?

With the changes to self assessment thresholds bought in to simplify the submittal processes, has it really had the positive impact the government were hoping? Let’s explore this in more detail.

When the autumn statement was released there was a very small area included which relates to employees on PAYE who no longer have to file tax returns from 2024/25, regardless of the amount that they earn. This was a follow up on the changes introduced in 23/24 where employees who solely had income from PAYE only had to worry about self assessment when there earnings were in excess of £150,000.

When these changes were introduced there were a number of concerns raised about any underpayments or overpayments that could be made by professionals earning over £100,000 who do not have to file any returns in regards to self assessment.

There does appear to be a number of discrepancies which can cause issues with employees that have no other taxable income than PAYE. There can easily be failures to declare specific liabilities simply because it was perceived that this was no longer needed. There could also be a failure to pay any tax owed on investment returns because again it was assumed this was not applicable.

According to HMRC the message is simple; keep them up to date with all income by using their digital services. Report everything that is relevant. Of course this sounds easy but anybody who has used the HMRC platform knows it can actually be a complex matter. Coupled with the issues which arise when contacting HMRC support to ask questions the phrase “clear as mud” can sum up the entire process.

The simple solution is to leave it to the professionals. Seek out a qualified accountant who knows exactly what is needed can take care of the entire process. Take stock early, consider all factors that are relevant but most importantly, consult with experts who are easy and available to contact when you need them.

In summary the changes in self-assessment threshold have been introduced to simplify the process but clearly it has caused more confusion than clarity. So why change something when it is not broken?

If you have any questions in regard to self assessment thresholds or need some help with any aspect of business accountancy our team would be happy to help. 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

What Are You Asked For When Setting Up With A New Accountant | New Accountant |
What are you asked for when setting up with a new accountant? 758 513 Stepping Stones Accountancy

What are you asked for when setting up with a new accountant?

Change can often fill people with dread. We are at our most happy when we are content and feel safe. Even the little things like changing the provider of our home insurance or our utility provider can cause stress, so much so that many just stick with an auto renew.

However, change can be good and should be embraced. Gone are the days when changing to new suppliers cause extra work, hassle and delays. Instead, change is simple, easy and stress free. The same can be said when appointing a new accountant. Of course, there is a little bit of work to be done but by completing the following simple activities your new accountant can be up and running in no time:

Stage 1 – 20 Minutes

The first step takes no more than 20 minutes, it is a simple telephone call to undertake a fact-finding exercise. It is a great chance to cement the business relationship, run through some standard business questions, identify the type of help that is needed and recommend steps to move forward.

Stage 2 – 2 days

Next step is a data exchange process which includes proposal of work, access to all relevant online portals and uploading data. This is typically a 2-day process, and the result is the acceptance of the accountant’s plans and commitment to agree to work being undertaken.

Stage 3 – 1 week

Our third step is a 1-week process focussed on due diligence. The necessary security checks will be undertaken, including photo ID for recognition and anti-money laundering. Following this will be the full registration to a client portal.

Stage 4 – 2 to 5 weeks 

The final stage, which is the longest, is the registration through HMRC. This will involve applying for Corporation Tax, PAYE, VAT and Self-Assessment codes which allow the accountant to act on behalf of the business or individual. Authorisation will typically take 10 days to arrive and then a scheduling of works can commence.

Once these key steps are taken a business owner can sit back and relax in the knowledge that all of their accountancy responsibilities are taken care of, and they can focus solely on the successful running of their business.

If you have any questions or have a few more questions, 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

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