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Changes to the budget!!
The original budget set out below has now been revised by the new Chancellor. Please follow this link for the revisions
Amended tax table available here
Mini budget September 2022
Chancellor Kwasi Kwarteng has unveiled what he claims are the biggest tax cuts in a generation, so what is in his mini-budget?
• Cut in basic rate of income tax to 19% from April 2023
• Government estimates 31 million people getting £170 a year more
• Currently, people in England, Wales and Northern Ireland pay 20% on any annual earning between £12,571 to £50,270 - rates in Scotland are different
• 45% higher rate of income tax abolished for England, Wales and Northern Ireland taxpayers
• One single higher rate of income tax of 40% from April next year
• Reverse recent rise in National Insurance (NI) from 6 November
• Workers and employers have paid an extra 1.25p in the pound since April
• New Health and Social Care Levy to pay for the NHS will not be introduced
Spring statement 2022
The Chancellor made his annual Spring Statement speech today where he set out the Government’s tax plan to support the UK economy, businesses and families in both the short and the medium term.
Announcements for employees
• We are raising the level at which people start to pay National Insurance contributions, increasing the National Insurance Primary Threshold (PT) and Lower Profits Limit (LPL) from £9,880 to £12,570.
• This is a tax cut worth over £330 for a typical employee in the year from July 2022.
• We are also cutting income tax. Taxpayers will gain £175 on average thanks to a 1ppt cut in the basic rate of income tax in 2024, the first cut to the basic rate in 16 years.
We are helping hard-working families with the cost of living
• We will increase the Primary Threshold and Lower Profits Limit – the point at which employees and the self-employed start paying National Insurance contributions (NICs) – to bring them in line with the income tax personal allowance of £12,570.
• This will mean working people will be able to earn £12,570 tax free, an increase of £2,690 in cash terms.
• This will benefit almost 30m working people. This is a tax cut for a typical employee worth over £330[footnote 1] in the year from July 2022; the equivalent saving for a typical self-employed person would be worth over £250.
• To ensure all individuals see the benefits of the increase as early as possible, while also allowing employers and payroll software providers sufficient time to update their systems, the increase will be implemented from July 2022.
We are supporting the lowest earners to keep more of the money they earn
• From July, around 70% of workers who pay NICs will pay less NICs than they otherwise would have, even after accounting for the introduction of the Health and Social Care Levy.
• Due to this measure, 2.2 million people will be taken out of paying Class 1 (Employee NICs) and Class 4 NICs (Self-employed NICs) and the Health and Social Care Levy entirely, on top of the 6.1 million workers who already do not pay NICs.
• We are also reducing Class 2 NICs payments for lower earning self-employed individuals. From April 2022 self-employed individuals will not pay Class 2 NICs on profits between the Small Profits Threshold (£6,725) and Lower Profits Limit, but they will continue to be able to build up National Insurance credits. This will benefit around half a million self-employed people by up to £165 a year.
• Taken together, these measures will meet the government’s ambition to ensure that the first £12,500 earned is tax free.[footnote 2]
• The government will cut the basic rate of income tax by 1ppt from April 2024.
• This is the first cut to the basic rate of income tax in 16 years (the last cut to the basic rate was in 2008-09).
• Over 30m taxpayers will benefit from this policy in 2024-25, with an average gain of £175.
• There will be a three-year transition period for Gift Aid relief to maintain the income tax basic rate relief at 20% until April 2027. This will support almost 70,000 charities and is worth over £300m.
• The cut will apply to the basic rate which applies to non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland; the savings basic rate which applies to savings income for taxpayers across the UK; and the default basic rate which applies to a very limited category of income taxpayers made up primarily of trustees and non-residents.
• It is fully costed and fully paid for, including additional funding for the Scottish Government as this is a devolved matter in Scotland.
Background: What does a July implementation mean for employees and the self-employed?
What this means for employees
• Between 6 April and 5 July 2022, employees will be able to earn £190 a week without paying Class 1 NICs and the Levy.
• Between 6 July 2022 and 5 April 2023, this weekly threshold will increase to £242.
• From April 2023 onwards, employees will be able to earn £242 each week, equivalent to £12,570 a year, without paying Class 1 NICs or the Levy.
• The PT will then remain aligned with the income tax personal allowance.
• Employees entitlement to contributory benefits are unaffected by this measure. What this means for the self-employed
• The self-employed pay NICs on an annual basis, and at the end of the tax year. For the 2022-23 tax year, the self-employed will be able to earn £11,908 before paying Class 4 NICs and the Levy. The annual figure for the self-employed is £11,908, because this accounts for 13 weeks of £9,880 and 39 weeks of £12,570. That means the benefit the self-employed receive in 2022-23 is in line with employees.
• From April 2023 onwards, the self-employed will be able to earn £12,570 before paying any NICs.
• The LPL will then remain aligned with the income tax personal allowance.
• Further, for 2022-23, the point at which the self-employed start paying Class 2 NICs will increase to £11,908. This means that those with profits between the Small Profits Threshold (£6,725) and the LPL (£11,908) will not need to pay Class 2 NICs from April 2022, but will still be able to access entitlement to contributory benefits.
1. The tax cut is worth £332 to all employees who have only one job and who earn above the Primary Threshold in each pay period across the year from July 2022. The equivalent figure for a self-employed individual is reached by adjusting the employee savings figure to reflect the lower rates of Class 4 NICs paid by the self-employed. ↩
2. There may be some individuals who continue to pay NICs even if annually they earn less than £12,570, for example, someone whose earning all fall in a single week or month. This is because NICs is charged on a pay period basis and is not annualised, cumulative or aggregated. ↩
3. “Effective Annual threshold” refers to the Primary Threshold level if the weekly level was applied for a full year. ↩
4. This is the threshold for people who are subject to company director rules. The annual equivalent for the period 6 July 2022 to 5 April 2022 is £11,908 because this accounts for 13 weeks of £9,880 and 39 weeks of £12,570. ↩
5. The self-employed pay NICs on an annual basis, and at the end of the tax year. The annual figure for the self-employed is £11,908 because this accounts for 13 weeks of £9,880 and 39 weeks of £12,570. ↩
A more detailled guide to the statement is here
Minimum wages increases
The nmw is increasing from 1/4/2022. Make sure you are paying the ocrrect amounts ! Try using the government's calculator here and for full details of who, what, when and how much follow this link.
Parental bereavement leave for employees
The Government intends to introduce a new entitlement to Parental Bereavement Leave and Pay from April 2020.
This will provide parents who lose a child or suffer a stillbirth with a day-one employment right to take two weeks off work. Eligible parents will be entitled to two weeks’ statutory pay.
Notice and evidence requirements: Parental Bereavement Leave
An employee will not need to provide written notice for Parental Bereavement Leave. The length of notice required for leave will vary depending on whether the employee intends to take leave within the first 8 weeks following the death (Period A), or later (Period B).
• For leave taken in Period A, the employee will need to notify their employer before they would be due to start work on the first day of absence.
• For leave taken in Period B, the employee will need to provide notice at least one week before the start of the leave period.
Statutory Parental Bereavement Pay (SPBP) An employee must provide written notice for SPBP within 28 days beginning with the first day of the week in which SPBP is being claimed, stating the dates of the period(s) to which the claim relates. At the same time, an employee must also provide in writing to the employer the specified information:
• The employee’s name
• The date of the child’s death
• A declaration that the person meets the conditions of eligibility.
Unlike leave, the length of notice required for SPBP does not vary depending on when the entitlement is taken. The Parental Bereavement (Leave and Pay) Act 2018 applies only to Great Britain.
Changes to National Insurance will cut your tax bill
The government confirmed on 30 January that around 31 million taxpayers will benefit from a tax cut, as National Insurance contributions thresholds rise to £9,500 per year
A typical employee will save around £104 in 2020-2021, while self-employed people, who pay a lower rate, will have £78 cut from their bill. All the other thresholds will rise with inflation, except for the upper NICs thresholds which will remain frozen at £50,000, as announced at Budget 2018.
The threshold changes will not affect low earners’ entitlement to contributory benefits such as the State Pension, with the Lower Earnings Limit and Small Profits Threshold, above which individuals start building entitlement to contributory benefits, rising with inflation.
Full NIC tables and thresholds can be found here.
Are your employees paying too much for childcare?
Yes, if they’re missing out on Tax-Free Childcare or have applied, but not (yet) used their childcare account!
Why? Because parents who do can save up to £2,000 per child per year on regulated childcare costs, such as:
• before and after school clubs
• holiday clubs.
For example, if your childcare costs are £750 per month, you only need to pay £600 because the government will add £150 ‘top-up’ into your childcare account
Full details and how to claim available here.
National Living Wage to rise by 6.2% from April 2020
Over 25 year olds get biggest rise yet
The government has announced the national living wage will rise by 6.2% for over 25 year olds in the biggest cash increase it’s ever seen.
The rise is more than four times the rate of inflation.
The National Living Wage and National Minimum Wage increases hourly pay from April 2020, as follows:
Aged 25 + £8.72 per hour (up 6.2%)
21 – 24 year-olds £8.20 per hour (up 6.5%)
18-20 year-olds £6.45 per hour (up 4.9%)
Under 18s £4.55 per hour (up 4.6%)
Apprentices £4.15 per hour (up 6.4%)
This means a full time worker aged 25 or over who receives the National Living Wage will get a pay rise of around £930 per annum.
It is illegal not to increase your employee’s pay to the above rates.
HMRC monitor whether employers pay the correct amounts and if you do not they will send you a notice to pay any arrears plus a fine of up to £20,000 per employee.
HMRC also publish details of employers who do not comply.
Reminder on student loans
From April HMRC started to share PAYE student loan and/or postgraduate loan repayment information with Student Loans Company (SLC) more frequently
From 6 April, there are two loan types in operation. Employers will now receive either a Student Loan (SL1) and/or Postgraduate Loan (PGL1) start notice, asking them to start taking deductions.
It is important that the notice is checked for the loan or plan type and that deductions are taken correctly and recorded on the Full Payment Submission (FPS). If not HMRC will either:
• make contact to request that the employer stops taking deductions under the wrong loan or plan type and start taking deductions under the correct one by: - phone - post through issuing an SL2/PGL2 and SL1/PGL1 or - Generic Notification Service messages to the employer’s PAYE online account
• ask the employer to stop and refund the incorrect deductions if they are able to.
Tax free child care - can your employees benefit ?
School holidays made cheaper ?
Tax-Free Childcare is a government scheme available to working parents with children aged 0-11.
Eligible parents could get up to £2,000 per child, per year to spend on qualifying childcare. For parents with two children that could be a £4,000 per year saving on the family’s budget.
You may have already advised your clients about this help, but did you know that Tax-Free Childcare is not just there for everyday childcare costs, such as childminders, nurseries and nannies?
Your clients can also use it to pay towards the cost of (qualifying):
• after school clubs
• play schemes
• holiday clubs
• summer camps
Benefits in kind for employees with mobile phones
Exemption from tax depends on some key issues
For many years the standard assumption has been that where an employer provides a mobile phone to an employee this is exempt from tax and national insurance. The legislation backing this assumption up is:
Section 319 ITEPA 2003 (as amended by Finance Act 2006)
In most circumstances the provision of one mobile ‘phone to a director or employee for private use is exempt from charge. The exemption covers the phone itself, any line rental and the cost of private calls paid for by the employer on that phone.
However the devil is in the detail so be careful to ensure that the following rules are being met. You don’t have to report anything to HM Revenue and Customs (HMRC) or deduct and pay tax and National Insurance if both the following apply:
1 you provide your employee with only one mobile phone or SIM card. So where there is more than one phone supplied, only one is exempt from paying and reporting, but any other phones count as assets.
2 the phone contract is between you and the supplier. This might cause an issue where the employer is reimbursing the employee for their own phone or the employee arranges the contract but the employer pays the supplier.
This is where businesses can be caught out. HMRC gives the following scenarios:
If your employee arranges the phone but you pay the supplier
The employee uses their own phone and you reimburse them
If you only reimburse the monthly phone tariff, deduct and pay Class 1 National Insurance and PAYE tax through payroll. There are no additional reporting requirements.
Private call charges over the monthly phone tariff
Deduct and pay Class 1 National Insurance and PAYE tax through payroll. There are no additional reporting requirements.
Business call charges over the monthly phone tariff
You must report the amount on form P11D. You don’t have to deduct and pay any tax or National Insurance.
Your employee has a ‘pay as you go’ mobile and you reimburse them for business calls
You must report the amount on form P11D. You don’t have to deduct and pay any tax or National Insurance.
Exemptions – formerly called dispensations
A very important thing to remember is that you don’t have to report some routine employee expenses to HM Revenue and Customs (HMRC). This is called an ‘exemption’ and includes phone bills.
To qualify for an exemption, you must be either be:
paying a flat rate to your employee as part of their earnings - this must be either a benchmark rate or a special (‘bespoke’) rate approved by HMRC
paying back the employee’s actual costs
Follow this linkto HMRCs detailed guidance on benefits in king generally
Follow this linkto HMRCs detailed guidance on the taxation of mobile phone provision
Completing P11ds and employers’ end of year returns – get help here
Get help if you’re an adviser who has clients with employer's end of year forms - including P11D, P11D(b) and P9D.
HMRC has issued an expenses and benefits toolkitwhich is aimed at helping and supporting tax agents and advisers in completing employers’ end of year forms (P11D and P11D(b)) on behalf of their clients. It will also be of use to employers or anyone who is completing these forms or as a general source of reference for tax agents,
The toolkit is designed to help reduce the most common errors that HMRC comes across and contains:
cross-references to legislation and HMRCs internal tax manuals.
Although not mandatory, it is best practice to use it, especially when you come across a more complicated benefit in kind /end of year return situation.
The full list of agent’s tool kits is accessible here.
Disguised Remuneration Schemes - Tax charges on outstanding loans come into effect on 5 April 2019, but what future relevant dates should I know about?
What is disguised remuneration?
How do the schemes work?
How can I tell if I am being paid through a scheme?
What are the tax consequences of using this type of scheme?
How is the charge paid?
What are the relevant dates I should know about?
How should we contact HMRC to discuss a settlement?
The new loan charge regime effectively starts from 5 April 2019 and relates to loans primarily made between 6/4/1999 and 5/4/2019. HMRC have made it clear that they consider that it is essential that anybody affected acts now as contacting HMRC before that date to arrange a settlement may well prove beneficial.
Without a request for a settlement, the loan charge rules will apply from that date. These are very complicated and - depending on which type of scheme is operated – may involve the following:
The need for employees to declare to their employer that they have a relevant loan
The need for employers to include the loan in their normal PAYE submissions and deduct this from the employee
The charge might need to be included in the individual's self-assessment return
The charge might affect an individual’s income related benefits
At the end of this article there are links to more detailed guidance from HMRC.
What is disguised remuneration?
A disguised remuneration ‘scheme’ involves paying staff via loans instead of normal taxed salaries. As the loans are never intended to be paid back, this is designed to avoid paying Income Tax and National Insurance contributions on that income.
In the past this type of arrangement made the headlines involving famous celebrities and footballers. However, these days similar schemes are being advertised more generally, often the main tag line being ‘tax efficiency’ or ‘retain 80-90% of your pay’. Some of them are through umbrella companies, which also appears to add some legitimacy to the process.
The legislation covers two main schemes:
Employment based schemes
Self employed schemes (trade based schemes)
How do the schemes work?
Naturally the exact details of each process will vary but they do generally have a common theme. HMRC give the following example of a typical scheme:
You receive a small payment which has tax and National Insurance contributions deducted.
At the same time (or shortly after) you receive a larger payment without tax and National Insurance contributions deducted.
The larger payment may arrive from a different account than the first payment, potentially from overseas, although not necessarily.
Your payslip may show the larger payment separately and refer to it as something other than pay. No tax or National Insurance contributions have been deducted.
How can I tell if I am being paid through a scheme?
Obviously any type of remuneration which does not take the normal forms might be suspect. HMRC has published the following red flags:
the company promises that you can keep 80, 90 or 95% of your wages and be tax compliant (this is unlikely to be true as, in most cases, the basic rate of Income Tax is 20% and National Insurance contributions are also due on earnings)
only a fraction of your salary is paid through payroll and subject to PAYE (indicating that you are only paying tax on some of your income)
you are paid using a loan, credit or investment payment and the company claims this isn’t subject to income tax or National Insurance contributions (this is tax avoidance)
the payment from your umbrella company is routed through various companies before it comes to you.
These companies may tell you they are compliant with tax rules but you shouldn’t rely on this. These companies do not always explain the risks of using these schemes or try to hide the fact they involve tax avoidance.
What are the tax consequences of using this type of scheme?
The loan charge was announced at the Budget 2016 and the charge will apply to disguised remuneration loans that are outstanding on 5 April 2019.
Prior to this, the options available are:
People who have used these schemes have a choice – they can:
repay the original loan
agree a settlement with HMRC
pay the loan charge when it comes in to force.
Settling now will give you certainty about your disguised remuneration scheme and may also mean you:
do not have to pay the loan charge that comes into effect on 5 April 2019
pay a lower rate of tax on your disguised remuneration loans - the loan charge will add all your loans together and tax them in one year
settle on better terms - if a scheme moves to litigation, these terms may no longer be available
do not face extra costs if the scheme moves to litigation.
Note that if you want to settle your use of a disguised remuneration tax avoidance scheme so that you do not have to pay the loan charge, you should contact HMRC and send all the information needed as quickly as possible, and by 5 April 2019 at the latest.
How is the charge paid?
Please refer to the detailed guidance links at the end of this article.
What are the relevant dates I should know about?
Take action by 5/4/2019 to avoid the loan charge
Loan charge reporting requirements commence
Employee must provide UK employer with outstanding loan details
Deadline for postal RTI payment
Deadline for online RTI payment
If employer is liable to PAYE, employee must reimburse PAYE to avoid section 222
Deadline for individuals to fulfil reporting requirements to HMRC
Deadlines for individuals to register for ITSA
Deadline for 2018/19 self assessment return
How should we contact HMRC to discuss a settlement?
Contact HMRC on 03000 534 226 or firstname.lastname@example.org for contractor loan schemes.
For all other disguised remuneration scheme users, speak to your usual HMRC contact or email email@example.com.
Employee share scheme-share incentive plans
Share incentive schemes are an effective way of retaining employees in the short to medium term.
In the majority of share option schemes, employees are not allowed to exercise their option until they have been with the company for a minimum period of three years.
At present there are four types of approved share schemes. These are:
Share Incentive Plans (SIP)
Saving Related Share Option Scheme
Companies Share Option Plans (CSOP)
Enterprise Management Incentives (EMI) Schemes.
The approved shares have a tax and National Insurance Contribution (NIC) advantage. Providing that certain conditions are met the company will be able to award shares to its employees free of tax and NIC.
Typically a company will establish a UK resident trust and will transfer cash into that trust. Cash will then be used to acquire shares in the company.
There are four different ways in which an employee can receive shares under a SIP:
Free shares – an employer can award up to £3,000 worth of shares per annum to participating employees. Awards may be linked to performance, such as the performance of individuals, teams or divisions.
Partnership shares – an employee can buy up to £1,500 worth of partnership shares each year (or up to ten per cent of the income for the tax year if that is less). The shares are bought out of the salary before the deduction of tax and NIC.
Matching shares – an employer can ‘match’ up to two additional free shares for every one partnership share purchased by the employee.
Dividend shares – if an employee receives shares from free, partnership or matching shares the employee can reinvest up to £1,500 per annum of dividend in acquiring new shares.
Before operating the scheme the employer must first obtain HMRC approval. The conditions that have to be met in order to get HMRC approval are:
company must be quoted (any market) or not controlled by another company
the shares must be ordinary shares but the shares can have limited or no voting rights
the employees must be offered shares on similar terms
the scheme must be open to all employees (employee with less than 18 months' service can be excluded)
employees (together with their associates) must not have a ‘material interest’ in the company. Material interest means that they are not able to control more than 25% of the ordinary share capital.
As highlighted above, for all four types of approved share schemes above there is never a charge to income tax or NIC when the shares are awarded to the employees. The future charge, if any, is dependent on the time held as follows:
Free and matching shares – the employer can introduce a clause into the scheme rule to prohibit the withdrawal of the share within three years. If there is no such clause and the employee calls for the shares within three years there will be an income tax and NIC charge at the market value of the shares at the time they were withdrawn. If the shares are withdrawn between three and five years the income tax charge and NIC will be the lower of market value of the shares on allocation and the market value of the shares at the date of withdrawal. If the shares are withdrawn after more than five years there is no income tax or NIC charge at the date of withdrawal.
Partnership shares – unlike free and matching shares the employer cannot prohibit an employee withdrawing the shares from the plan. As with free and matching shares if the shares have been in the plan for less than three years there will be an income tax charge at market value of the shares at the date of withdrawal. If the shares have been in the plan between three and five years, the income tax will be the lower of the ‘salary sacrificed’ to purchase the share and the market value of the shares at the date of withdrawal. If the shares remain in the plan for at least five years, there is no tax or NIC charge at the date they are withdrawn.
Dividend shares – the dividends used to purchase the shares are tax free (the dividends used to purchase the share are omitted from income tax computation in the year in which they are received). The employer cannot prohibit an employee from withdrawing the share from the plan. If the dividend shares are withdrawn within three years, the dividend originally used to purchase the share becomes taxable in the year the shares are withdrawn. There is no income tax if the shares are withdrawn more than three years after purchase.
Capital Gain Tax (CGT) is charged on the difference between the sale proceeds and the value of the shares at the time of withdrawal. So the CGT can be avoided if the shares are sold as soon as they are removed from the trust.
Auto enrolment spot checks
Ensure you dont get caught out by spot checks
Spot checks started last month and will be carried out across the country including Essex, Kent, Hertfordshire, Bedfordshire and Cambridgeshire.
This is part of the latest in compliance drives from the Pensions Regulator. It follows a series of spot checks carried out over the past 12 months, in London then the North East, Northern Ireland, South Wales, Edinburgh, Glasgow, Greater Manchester, Sheffield and Birmingham.
This latest round of spot checks targets employers who are still non-compliant despite penalty action and those suspected of providing false or misleading information to The Pensions Regulator about how they are meeting their automatic enrolment duties.
Make sure your clients know what they need to do to meet their on-going duties and that their records are kept up to date.
As previously highlighted a healthcare company and its managing director have pleaded guilty to misleading The Pensions Regulator about providing its staff with a workplace pension.
Birmingham-based Crest Healthcare and managing director Sheila Aluko admitted recklessly providing false or misleading information to TPR. They also admitted wilfully failing to comply with their automatic enrolment duties and were fined £20,000.
Employment benefits - whats the cost?
A refresher on the treatment of benefits, form P11D and relevant deadlines.
Employment benefits fall into the following broad categories:
Salary, which is taxed through to payroll when the money paid to the employee is usually monthly or weekly.
Taxable benefits in kind such as a company car, accommodation, loan at a reduced rate of interest and various other items, all of which should be reported on form P11D.
Shares in the employer company (or group) or options to buy such shares in the future. There are various tax schemes made available by HMRC which, if used by the employer, can reduce the tax which would otherwise be payable by the employee.
There are various tax free benefits which can be provided by the employer to the employee. These cover benefits such as health screening, late night taxis, training courses, sports facilities and many more. See the June issue of In Practice for a comprehensive list of these tax free benefits.
The employment benefits reported on a form P11D include the following:
Assets transferred from the employer to the employee
Payments made by the employer on behalf of an employee
Vouchers and credit cards made available to the employee
Living accommodation provided by the employer to the employee
Mileage allowance payments not taxed at source
Cars and car fuel provided by the employer for use by the employee
Vans and van fuel provided by the employer tor use by the employee
Interest free and low interest loans provided by the employer to the employee
Private medical treatment or insurance.
Qualifying relocation expenses payments and benefits
Services supplied by the employer to the employee
Assets placed at the employee's disposal.
Other items (such as subscriptions and professional fees)
Expenses payments made on behalf of the employee.
The employer should submit all P11Ds and one P11D(b) form to HMRC by 6 July following the relevant tax year (for the tax year 2017/18 deadline in 6 July 2018). Form P11D(b) is used to declare the amount of Class 1A NICs the employer is due to pay for the tax year. The form is required if the employer is liable to return any expenses payments or benefits on form(s) P11D. The deadline for giving employees a copy of their form P11D is also 6 July following the end of the tax year.
The Class 1A National Insurance Contributions should be paid to HMRC by 22 July (or 19 July if paying by cheque) following the end of the tax year.
Employers pay Class 1A National Insurance contributions on all the above except items (b), (c), (e) and (n).
The P11D guide for the tax year 2017/18 explains how the taxable benefits listed above are calculated and how these should be entered on form P11D.
Further useful guidance from HMRC is in Booklet 480: expenses and Benefits – A Tax Guide and Booklet 490: Employee Travel – A Tax and National Insurance Contributions Guide
Employee share schemes
The tax treatment of employee share schemes will depend on whether the scheme is a registered scheme for tax purposes and the type of scheme. View this handy introduction to the various schemes.
Revised national minimum wage from 1/4/2018
These rates are for the National Living Wage and the National Minimum Wage. The rates change every April.
25 and over
21 to 24
18 to 20
April 2017 (current)
Apprentices are entitled to the apprentice rate if they’re either:
aged under 19
aged 19 or over and in the first year of their apprenticeship
Example An apprentice aged 22 in the first year of their apprenticeship is entitled to a minimum hourly rate of £3.50
Apprentices are entitled to the minimum wage for their age if they both:
are aged 19 or over
have completed the first year of their apprenticeship
Example An apprentice aged 22 who has completed the first year of their apprenticeship is entitled to a minimum hourly rate of £7.05
New dividend tax causes problems for directors
The dividend tax comes into effect on 6 April 2016, and applies to all dividends the individual receives in excess of £5,000 per tax year. The average company director who takes a modest salary within his personal allowance, and the rest of his income from the company as dividends, will pay more tax in 2016/17 than he did in 2015/16.
Under self assessment this additional tax would be payable by 31 January 2018, as the balancing payment for that tax year. However, HMRC doesn’t want to wait that long for the extra tax, so it has amended the tax codes of many owner/directors to “code out” an estimated amount, which is approximate to the dividend tax due for the year.
The deduction in the PAYE code is labelled ‘dividend tax’, and the notes on the P2 (PAYE coding notice) say: “this is to collect the basic rate of tax due on your dividend income.” The P2 notes for a higher rate taxpayer refer to higher rate tax.
However, the good news is that the taxpayer can object to having dividend income or interest included in their PAYE code. To get the PAYE code changed they can ring HMRC, or complete the online form.
The new living wage
In April 2016 the Government’s new National Living Wage will become law.
If you’re working and aged 25 or over and not in the first year of an apprenticeship, you’ll be legally entitled to at least £7.20 per hour. That’s an extra fifty pence per hour in your pocket. The Government is committed to increasing this every year.
If you’re an employer, you’ll need to make sure you’re paying your staff correctly from 1st April 2016, as the National Living Wage will be enforced as strongly as the current National Minimum Wage.
For more details please visit the official Government living wage webpage.
Shared parental pay
The Government is reforming the statutory pay and leave entitlements available to
employed parents. For babies due or adopted children matched or placed on or after
5 April 2015 a new entitlement of Shared Parental Pay and Leave (ShPP/SPL) will
replace Additional Statutory Paternity Pay and Leave (ASPP/APL). The parents of
babies due or adopted children matched on or before 4 April 2015 will continue to be
eligible for ASPP and APL. For full details follow this link.
Online learning for employers
If you have questions about your payroll, PAYE tax and National Insurance responsibilities as an employer, HMRC have launched a new e-learning site.
You can dip in and out when you need to and the e-learning will help you understand what you need to do when you take on an employee, how to deal with PAYE tax and National Insurance, including other responsibilities as an employer.
To access the help site follow this link
Changes to sick pay compensation
The Statutory Sick Pay (SSP) Percentage Threshold Scheme (PTS) ceased to exist on 6 April and will be replaced later in 2014 by The Health and Work Service (HWS).
The Percentage Threshold Scheme provided compensation to employers who experienced high levels of employee sickness absence, allowing them to recover some or all of the Statutory Sick Pay paid. Under the new rules this compensation scheme will be scrapped, leaving employers to bear the full cost.
Employers providing medical treatments recommended by HWS or an employer-arranged occupational health service, will find that this employee benefit is exempt from tax up to £500 a year per employee.
It has been announced that a benefit of the scheme for employers is that SSP records will not need to be kept. However, it is important to remember that employers will still be required to keep records of employee absence.
HWS is built around the premise of helping employers manage sickness absence better and helping employees back to work more quickly. One of the key elements is a Return to Work Plan (RtWP) which will include recommendations to help the employee return to work.
There are two elements of the Service and these are described as:
“Advice: Anyone including employers, employees and GPs will be able to seek advice via a phone line and website to help identify issues that may be affecting employees or preventing a return to work. HWS will provide information on possible interventions, adjustments or self-help measures that may support those individuals.
Assessment: Once the employee has reached, or is expected to reach, four weeks of sickness absence, they can be referred by their GP or employer for an assessment by an occupational health professional. This will identify any measures, steps or interventions that would facilitate a return to work. Recommendations for these will be included within a return to work plan that will, with the employee’s consent, be shared with their employer and GP.”
It will be interesting to see how the scheme works for employers given that they will lose the compensation payment but they can offer a tax-free benefit to employees, they have access to an advice line and, if allowed by their employees, can see the Return to Work Plan.
New publications from ACAS
ACAS - The official Arbitration and Conciliation Service for employers and employees - have released two new guides which give important and interesting information on the following subjects:
Flexible working hours
Lay offs and short time
For a full range of ACAS publications avaialble follow this link
We can also help with legal representation for employers and employees. Please contact us for more details.
New numbers for Online Services Helpdesk and Employer Helplines
From 23 April 2013, HM Revenue & Customs are changing some helpline numbers.
The helplines below are changing their telephone numbers to those shown:
Online Services Helpdesk - 0300 200 3600
Billpay Plus - 0300 200 3601
Employer Helpline - 0300 200 3200
New Employer Helpline - 0300 200 3211
You should only call these numbers if you have questions about that area of business.
For most people the new numbers will reduce the cost of calling these helplines. You can check the exact cost by calling your telephone service provider.
If you have hearing or speech impairments, the new textphone number for the:
Online Services Helpdesk is 0300 200 3603
Employers Helpline is 0300 200 3212
You will still also be able to use the old numbers (with the 0845 code), for approximately 18 months.
Online help from HMRC
Online seminars - HMRC has produced webinars (online seminars), on a variety of topics to help you understand your tax obligations better.
There are two types of webinar:
• live webinars lasting one hour that take place on specific dates and include the opportunity to ask questions throughout
• pre-recorded webinars, lasting approximately 30 minutes and are available for you to watch at any time
The webinars cover many aspects of being an employer including first steps, statutory payments, help with your end-of-year returns and Real Time Information.
Please follow this link for the online help index.
Employer alerts - Register for HMRC's free employer email alerts so that they can let you know when the latest information is available.
Follow this link to register
Currently recruiting? Have you checked your employees right to work in the UK ?
As an employer you are required to carry out document checks to ensure you only employ people who have the right to work in the UK. Checking these documents will help you identify if a person is allowed to work in the UK and also provide you with a statutory excuse against liability for a civil penalty if that person is an illegal worker.
FACT: You could receive a penalty of up £10,000 per illegal worker you employ.
The following steps will help you to not fall foul of the law:
• You must ask for, check the validity of, and take copies of original, acceptable documents before a person starts working for you
• If a person has a time limit on their right to work, you will need to carry out repeat document checks at least once every 12 months
• If a person has a restriction on the type of work they can do and, or, the amount of hours they can work, then you should make sure that you do not employ them in breach of their work conditions
• You will not have a statutory excuse against liability for a civil penalty if you knowingly employ an illegal worker, regardless of any document checks you carry out before or during a person’s employment.
You can find out more about the checks you are required to make and the documents considered acceptable on the UK Border Agency’s website at www.ukba.homeoffice.gov.uk/sitecontent/documents/employersandsponsors/ preventingillegalworking/.
You may find using the ‘Right to Work Checklist’ at the back of these guides helpful in ensuring you correctly carry out the checks.
You can also use the ‘Check if someone can work in the UK’ tool on the GOV.UK website at www.gov.uk/legal-right-to-work-in-the-uk for more information.
The UK Border Agency is making it much easier for employers to check the right to work of non-EEA nationals by rolling-out biometric residence permits (BRPs) to all those coming to live in the UK for more than 6 months. Almost a million BRPs have been issued so far in place of passport stamps and vignettes, and they will become the principal work entitlement document for non-Europeans over time.
Do you suspect illegal working?
Report it by calling the UK Border Agency’s Employers Helpline on 0300 123 4099 or Crimestoppers anonymously on 0800 555 111.
Automatic pension enrolment
Workplace pensions law has changed. Every employer has new legal duties to help their workers in the UK save for retirement. They must automatically enrol certain workers into a qualifying workplace pension scheme and make contributions towards it.
For a full guide on what you'll need to do now, on your staging date and beyond to make sure you're compliant, with help and information to support you with your new duties please follow this link
PAYE Real Time Information
From the end of 2013 most employers will be using RTI to deal with all of its payroll PAYE/NIC processing. This is a new online based approach to all interaction with HMRC covering payroll issues. Where we currently prepare the payroll for you then you don't need to worry as we will be dealing with all of the necessary changes.
Please follow this link for notes on what is changing and how this will affect employers . As always let us know if you have any queries.
The student loans system becomes ever more complicated for employers and employees alike so for a complete guide follow this link
Company cars - changes to advisory fuel rates
These new rates apply to all journeys until further notice. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.
To find a table of the new rates follow this link
New penalties for late payment on monthly PAYE/NIC
From May 2010 you may have to pay a penalty if you do not pay the PAYE due each month, on time and in full. Although technically this has always been the case, HMRC have now annouced what amounts to a tightening of their rules.The new penalties will apply to all employers, including large employers (who are required to pay electronically) and will replace the Mandatory Electronic Payment surcharge.
The penalties will be a percentage of the amount you pay late. They will start at 1 per cent and increase to 4 per cent depending on the number of late payments in a year. There are also penalties of 5 per cent if any of the PAYE due is still not paid after six months; and again after twelve months.You will not get a penalty if you have a reasonable excuse for being late or if you are only late once in a tax year (unless that payment is more than six months overdue). You can also appeal against the penalty if you disagree with HMRC’s decision to impose it, or if you believe that the amount of the penalty is wrong.
It is very important that from May 2010 all employers ensure that payments are made on time and that any liabilities are not simply left until the annual end of year return.
Penalties for not filing starter/leaver details online
Since April 2010, employers who have more than 50 employees need to file all starter/leaver details online - P45, P46 etc. We understand that warning notices for failure to do so have been issued and the first non e-filing penalties will also start to be issued shortly. It is therefore very important that all larger employers are properly set up with online payroll software or use a suitable payroll bureau.
Paternity pay and 'fit notes'
On 6th April 2010, new regulations come into force which allow for additional paternity leave and pay. For parents of babies born on or after 3rd April 2011, eligible fathers (or partners) will be entitled to take up to 26 weeks' additional paternity leave, if the mother returns to work before the end of her statutory maternity leave period. Part of additional paternity leave will be paid if taken at the time when the mother would be receiving statutory maternity pay. This new entitlement also applies to parents who adopt.
Further information can be found following this link
From 6th April 2010, the old sick note will be replaced by the "fit note". GPs will issue fit notes focusing on what an employee can do and ways that an employee can be assisted back to work. This can include going back part-time or reducing responsibilties, until they are fully fit.
Useful guidance is available from ACAS following this link
Parents to Benefit from Increase
From April 4th 2010, the standard rates of statutory maternity, paternity and adoption pay increase from £123.06 to £124.88 per week.
Employer bulletins from HMRC
Revenue and Customs issue regular bulletins aimed at employers. These contain the latest news on various employment issues and other useful forms and contact details.
For the latest bulletin ( and access to earlier editions) follow this link