The Fair Work Agency begins operating

The Fair Work Agency (FWA), which was created under the Employment Rights Act 2025, is a government body which aims to both strengthen and simplify the way workers’ rights are enforced across the UK.

The FWA brings together various enforcement functions that used to sit under several separate bodies before it began its work on April 7, 2026. Its remit covers the enforcement of employment agency standards, pay-related rights including national minimum wage and national living wage. It also enforces requirements for a gangmaster’s licence and conditions for licences, and protections against serious labour exploitation, according to Gov.uk.

FWA’s enforcement authority extends across several key pieces of legislation:

• The Employment Agencies Act 1973
• Employment Tribunals Act 1996
• National Minimum Wage Act 1998
• Gangmasters (Licensing) Act 2004
• Fraud Act 2006
• Modern Slavery Act 2015
• Employment Rights Act 2025

Source: Gov.uk

What does this mean for employees?

Employees should find it easier to understand and enforce their workplace rights. Prior to the FWA, responsibility for the different aspects of employment law was spread across multiple bodies, including HMRC for National Minimum Wage enforcement, and the Gangmasters and Labour Abuse Authority for labour exploitation issues.

Over time, the expectation is that the FWA will expand its remit into areas such as holiday pay and Statutory Sick Pay enforcement. But even now, workers can have greater confidence that complaints about employment law breaches will actually be investigated.

The FWA also has powers to inspect businesses, investigate breaches, pursue employers who fail to comply fully with employment law, and to issue civil penalties. For employees who feel unable to take legal action against their employer themselves, the FWA may even support tribunal claims.

What does this mean for employers?

Employers who are already doing everything they should to protect their employees and work within the law have little to worry about. But any employer that isn’t doing everything right, or is perhaps cutting corners when it comes to employment law, needs to change their approach.

Businesses may face more inspections, be expected to keep better and more detailed records, and face larger penalties for breaches. The change will bring in more active enforcement, moving away from what has been a largely complaint-led system in the past.

The Gov.uk site states: “Where non-compliance is identified, FWA may take a range of enforcement actions depending on the nature and seriousness of the breach. It will also determine the most effective enforcement tools to address and prevent offending behaviour, ensuring that responses are proportionate and likely to prevent recurrence. These may include:

• Advice and guidance to secure compliance.
• Warning letters.
• Notices of underpayment and civil penalties.
• Naming employers for underpaying the minimum wage.
• Labour market enforcement undertakings or orders.
• Licensing action, including refusal, modification, suspension or revocation.
• Prohibition notice orders.
• Civil proceedings.
• Criminal investigation and prosecutions, where appropriate.”

Source: Gov.uk

We can help you meet your obligations

If you would like to know if your business is complying with employment law, or you simply need information on how the FWA might change what you need to do, then please get in touch and we would be happy to give you the guidance you need.

Are your employees paid the minimum wage for all hours worked?

Employees must be paid the minimum wage for all the hours they work, and while you may think you pay the right amount, it is important to check you have paid everything due.

The basic calculation to determine you have met your obligations in relation to the National Minimum Wage (NMW) can be done by dividing total pay by the number of hours worked in the reference period – which could be a week or a month – and the amount paid per hour must be at least the NMW. The levels for the NMW currently are £12.21 an hour for those over 21, £10 an hour for those 18 to 20, and £7.55 for those aged 16 to 17 and apprentices.

From April 2026, these rise to £12.71 an hour for anyone aged 21 or above, £10.85 for anyone aged 18 to 20, and £8 an hour for those aged 16 and 17 or apprentices.

When calculating if your staff have received the NMW for all their hours, you need to consider every extra hour they may have worked, which is where the calculation can become more complex.

How do you identify all hours worked?

This may seem simple to answer, but there are times when you may not realise that employees should be paid for additional time they have worked.

For example, any time they have stayed late to finish a piece of work, even if they volunteered to do so, still counts towards their hours. If they open or close the office or other commercial premises in the morning or evening, that time counts towards their work hours. So does training, if they’re required to do it, and any other time they are on site and required to work.

You can’t exempt yourself from paying for these hours by thinking ‘they’re salaried’, or ‘they volunteered to do it’. No matter why they are at work for longer than the hours they are expected to be, they must be paid the NMW for all of them.

Calculating that all hours are paid at the NMW

To make sure each person’s pay is at the right level, you need to consider the employee’s basic pay, any bonuses they may have been paid over and above their basic pay – although some are excluded from the calculation which your accountant can tell you more about – and any commission they may have been paid.

You don’t need to include overtime paid at a premium rate, such as time and a half or double time at Christmas or Easter, for example. You also don’t include expenses, benefits-in-kind, or tips, unless they are paid through payroll. But there are conditions to be aware of, so it would be best to speak to your accountant to make sure you’re including everything you should, and excluding anything that doesn’t need to be considered.

Once you have all this information, you can do the calculation to determine that all the hours worked have been paid at the NMW or above. But employers can be caught out if an employee is paid, say, a £100 day rate, and they work a 12-hour day. Or they are salaried to work 40 hours a week, but end up doing 50 hours overall. It isn’t always a simple calculation. So, if you need assistance, please speak to your accountant for advice to ensure you’re complying with all relevant regulations around the NMW.

We can help you

If you are unsure about how to do these calculations, or simply want reassurance that you’re doing everything right, then please contact us and we will do everything we can to assist you.

New tax codes issued in January – make sure yours is right

Tax codes for the coming tax year will begin to be sent out to taxpayers from January, but you will need to make sure the code you’ve been given is correct for your situation. HMRC does make mistakes, but if you resolve them before you begin the new tax year on April 6, you might save yourself some hassle.

If you pay your tax under the Pay As You Earn (PAYE) system, then you will be given a new tax code which will apply for the coming tax year. But if your earnings have changed, or you now have a company car, for example, or you no longer receive Benefits in Kind, it is especially important to make sure your tax code is correct.

If you don’t, you may find you’re paying more in tax than you need to, and you would then need to reclaim that tax back. Or worse, you could find you aren’t paying enough in tax, and then have to pay more later to catch up. So, checking your code as soon as you get it could mean you save yourself some trouble, and keep the right amount of money in your own pocket.

What should I expect to see?

The most common tax code in the 2025/26 tax year is 1257L, which is used for most people with one job and no income that is untaxed, or any taxable benefits such as a company car, said HMRC. As the personal allowance has remained at £12,570 for the 2026/27 tax year, this is likely to remain the most common tax code, as this number relates to the amount of personal allowance you have.

If the number is different to this, you usually multiply it by 10 to find your actual personal allowance. Also, if this code is followed by W1, M1, or X, then it is an emergency tax code, which is typically used if a new employee doesn’t have a P45. If this is the case, then the sooner you address this and get the correct tax code, the better it is for you.

Any tax codes that begin with the letter K denote deductions from wages for company benefits, state pension, or tax owed from previous years that are higher than the personal allowance. For example:

An employee with tax code K475 and a salary of £27,000 has taxable income of £31,750 (£27,000 plus £4,750).

The tax deduction for each pay period cannot be more than half an employee’s pre-tax pay or pension.

Source: Gov.uk

What if things change within the tax year?

The most likely reason for a change in your tax code within the tax year, is if your personal allowance or something else related to your Benefits in Kind changes. This might be a previous benefit that has been withdrawn by the company, such as a company car no longer being included as part of your job.

Your company will typically receive an alert if your tax code changes during the tax year, and your tax code should be updated before you receive your next paycheque.

So, keep an eye on your tax code throughout the year as well in case it changes. Again, there could easily be a mistake made.

We can help you meet your obligations

If you are unsure about your tax code, or whether you have had the correct amount of personal allowance allocated to you, then please get in touch and we would be happy to give you the guidance you need.

Smaller employers should be careful with salary advance schemes

Small employers thinking of using a salary advance scheme to support the financial wellbeing of their employees should be fully aware of how they work before using them, the Low Incomes Tax Reform Group (LITRG) is warning.

These schemes, which are also known as Earned Wage Access, are designed to give employees the option to get some of their monthly salary before payday and are usually run by a third party which advances the money to the employee. Then on payday, the employer reimburses the third-party through a regular payroll process, but the employer usually pays a fee for this service.

The scheme providers typically say there is no additional real-time information required for payroll returns, which while questionable according to the LITRG, is beneficial for both employers and employees, especially those on Universal Credit. New HMRC legislation has changed the reporting of salary advances to “regularise their position and give certainty that no additional RTI payroll returns are required”.

What are the risks of these schemes?

The implementation of the schemes is reasonably simple for employers, but there are risks for employees who use them. Often the employee also needs to pay a small fee to drawdown the cash, but if they make regular drawdowns, then these small amounts could become prohibitively expensive.

If these schemes are only used for emergencies, it would be less of an issue. But the International Labour Organisation, an agency of the United Nations, looked at how these services work around the world, and many employees are using them to meet daily expenses. It also describes some of the fees as ‘concerning’.

There are alternatives

If an employer wants to offer salary advance, they don’t need to employ a separate company to do so. There is no reason why a simple salary advance can’t be offered by the employer directly through the payroll.

It is also an option to change the payment periods to weekly rather than monthly, which could help employee cashflow. But it would be best to do this at the end of the tax year if you want to change this to avoid any possible penalties.

The other option is to provide a cheap or interest-free loan to help with a financial emergency, which could be tax efficient. You can find out more information about this at Gov.uk.

We can help you meet your obligations

If you are unsure of the best way to help your employees with their financial wellbeing, then please get in touch and we would be happy to give you the guidance you need.

Have you had PAYE or other errors in your payroll? You could face a penalty

If your business has had any kind of errors in Pay As You Earn (PAYE) for your payroll, you could be facing a penalty from HMRC for not operating your PAYE correctly, including anything from not filing something at the right time, or failing to do something accurately.

Sending information in late – or failing to send it at all – is one of the main problems that employers might face. Now that the Real Time Information regime is in place for non-exempt companies, most employers must submit information electronically to HMRC each time they make an employee payment.

If you fail to file on time, HMRC will typically, but informally, allow a three-day grace period, which means you may not be charged a late filing penalty until after this, said the Low Incomes Tax Reform Group (LITRG). But don’t abuse this grace period, as employers regularly missing the filing deadline will be monitored and could eventually face a penalty.

Will I be fined for every late PAYE submission?

If you don’t file your submission on time once, then you won’t face a fine. You are allowed one error each year penalty free. But any other late submissions could face a penalty. You can find out how much this might be on GOV.UK.

The fine relates to how many employees you have, but it would be at least £100. Even if you have paid the relevant amount of PAYE or National Insurance Contributions (NICs) but fail to file the paperwork, you could still be fined.

If you are fined for a second missed payment in the same tax year, it would incur a 1% penalty of any PAYE or NICs outstanding, rising to 2% of the tax due for four missed payments, then 3% for seven missed payments and so on.

If you fail to pay any amount of PAYE due within six months, then a penalty of 5% of the outstanding amount will be charged. An additional 5% would be due if the PAYE is still not paid within 12 months. In this case, you would face these penalties on the value of the first PAYE missed payment in a year, even though this wouldn’t incur the penalties outlined earlier. There is more information about this on GOV.UK.

However, if the amount owed is less than £100, the LITRG understands that HMRC is unlikely to issue a penalty.

Is it only PAYE filings that can be a problem for businesses?

Companies must file various returns to HMRC and making errors or failing to file on time will also potentially lead to penalties. Penalties can be applied for the late filing of P11D forms for example, which could be up to £300 as an initial penalty, plus £60 a day for as long as the form isn’t filed. This is for each form, so it could become very expensive if you have a lot of employees.

If you file your company’s P11D(b) late, you could face a penalty of £100 per 50 employees for every month or part month that this form is filed late. You should also make sure the information on the P11D is correct as any form believed to be filed negligently or fraudulently could face a penalty of up to £3,000. But this would only be expected in the most serious cases, according to the LITRG.

If a taxpayer has a reasonable excuse for missing the filing deadline, then they may not be penalised. A reasonable excuse would include a partner or close relative dying just before or at the time the deadline arrived, a software glitch at the time you were trying to file, or an unexpected hospital stay, among others. Typically, it is anything that you could not have foreseen that prevents you from filing, but HMRC will consider each instance on a case-by-case basis.

You can find out more information about how to appeal any penalties you think may be unfair online at GOV.UK. If you want to find out more about this subject, then you can visit the LITRG website to find more detail, or speak to your accountant who will be able to help.

We can help you

If you have missed a PAYE or P11D payment or made errors on either and want to be sure you don’t face penalties on future filings, then please contact us and we will do everything we can to assist you.

Are your employee benefits as good as you think?

Many companies offer employee benefits to encourage the best people to join their team, or maximise the chances of encouraging existing employees to stay. But are the benefits you offer as effective as you think they are?

Recent research from employee benefit specialist insurer Unum found that what employers think of their company perks differs wildly from what employees think. For example, more than two thirds of employers believe their benefits package has a positive impact on the overall wellbeing of employees. But less than a third of employees agreed.

Similarly, 75% of employers who were surveyed think their workforce’s health and wellbeing is good, while just 66% of employees agree that the benefits package has allowed them to proactively look after their health and wellbeing. Just over a quarter of employees believe their benefit package has helped to prevent health issues from worsening or becoming chronic.

A disconnect between employer and employee views

This research shows a relatively big disconnect between the wellbeing support that employers believe they provide and how employees perceive it, said Liz Walker, chief operating officer of Unum.

She added: “It’s often the case that benefits are recognised and highly regarded by employers, but they struggle to communicate these effectively, leaving employees unaware or misunderstanding the true value they offer. This gap can create a ripple effect, impacting morale, engagement and turnover, then ultimately the overall success of a business. Clearly, employee benefits packages need to go beyond just good intentions.”

Businesses must understand the power of a “comprehensive benefits package — as well as the negative impact of one that doesn’t meet employee expectations”, Ms Walker added. With the rise in National Insurance Contributions, it is more important than ever to ensure the employee benefits package is useful, otherwise it is a waste of money and could be a drain on the business.

Employers must engage with employees to find out the benefits they want

The key to getting the right package for employees is to ask employees what would be most beneficial to them. This might seem obvious, but the disconnect highlighted by this research shows this may not happen as often as it should.

Without asking employees what would be most useful to them, the money that employers spend on the benefits available could be money that is being wasted – far from ideal as business costs rise. Aligning employee requirements with the benefits on offer will help employees feel their needs are understood by their employer, which also helps to improve goodwill towards the business.

Make sure your benefits package meets employees’ needs

Getting this right could require a few approaches. The first could be to survey your employees about the kind of benefits you are considering, and then asking for suggestions of other items they may find useful. Once you have a range of responses, you can then begin to refine the offering for employees.

You may have to consider the cost of certain benefits too, something that you can discuss with your accountant. Not only does the cost of the benefit matter, the impact it would have on your employees is fundamental too. But this is something else your accountant can help you determine.

Contact us

If you want to find out how to implement the best benefits package for your employees, then please get in touch with us and we will do whatever we can to help.

Still time to maximise your end of tax year planning

Now is the time to work towards maximising your end-of-year tax planning before the new tax year starts on April 6. If you haven’t used all your allowances and reliefs for this tax year, then in the coming month, you should make the time to address this.

By using up as many of your tax reliefs and allowances as possible before the end of the tax year, you can be sure you are not paying any more tax than necessary to HMRC. So, you need to think about adding to your savings, pensions and investments in the next few weeks to benefit from the tax relief.

However, you need to make any changes you need before April 5, as the new tax year begins on April 6 in the UK.

Maximising pension contributions

One of the biggest benefits is the tax relief you can receive on pension contributions. Basic rate taxpayers will receive tax relief at 20% on up to £60,000 a year of contributions, but remember, you cannot receive more in tax relief than you pay in tax in a single year.

To make a £100 contribution to your pension, you would need to pay £80 into the pot, and the Government would add £20 in tax relief. But the good news is that the amount of tax relief you receive is paid at your marginal rate. So, if you are a 40% taxpayer, then you would need to put £60 into your pension and the Government would put in £40 to make it up to £100. Additional rate taxpayers, who are paying 45% tax, will pay £55 into their pension with tax relief of £45 from the Government to make up £100.

Anyone earning above £100,000 will see their personal allowance of £12,570 removed at the rate of £1 for every £2 earned above this level. It means that by the time you have earned £125,140, your personal allowance will have reduced to zero. Thanks to a quirk of the system, this means that someone in this position will have an effective contribution of 60% from the Government, as all contributions are paid from gross salary. This can reduce the income level for the calculation of the reduction in the personal allowance.

You should mop up as much of the tax relief as you can before April 5 for the current tax year. But if you didn’t maximise your contributions in the last three years, you can also use something called ‘carry forward’ which allows you to use up any additional tax relief that remains unused in these previous years.

Optimising savings and investments

Each person in the UK can put up to £20,000 a year into an Individual Savings Account (ISA), which is a tax-efficient savings vehicle. Unlike pensions, you don’t get tax relief on the payments you put into an ISA, but you do get tax-free income from an ISA at the other end, whether through generating investment income, or withdrawals of the capital.

If you are between 18 and 40, you can also set up a Lifetime ISA to save for your retirement or your first home. You can put up to £4,000 a year into this type of ISA until you’re 50, but your first payment made into this type of ISA must be made before you are 40 to qualify, and then the Government will add 25% up to a maximum of £1,000. A Lifetime ISA makes up part of your £20,000 allowance for the 2024/25 tax year, so make sure if you invest in another ISA that you don’t breach this overall limit.

Although Capital Gains Tax (CGT) doesn’t apply to ISAs, if you have investments outside of this, then it might be worth considering taking some profit from them to maximise your CGT allowance for this tax year. For the 2024/25 tax year, you can crystallise gains of £3,000 and pay no tax thanks to the CGT annual exemption. You can use this amount before April 5 if you haven’t done this already this tax year.

Tax relief on work expenses not reimbursed by your employer

Many people don’t realise they can benefit from tax relief on work-related expenses, even if they pay PAYE. If you pay some work-related expenses, for example for membership to professional bodies, professional publication subscriptions, travel in your own vehicle for work – but crucially not to or from where your office is – or if your contract designates that you work from home, then you can reclaim these from HMRC. But this is only possible if your employer doesn’t reimburse you for them.

If you file a self-assessment tax return, then this relief is claimed on the ‘employment’ pages. If you don’t already file a self-assessment for another reason, then you can use form P87 if you are claiming less than £2,500 per year, which will need to be posted to HMRC. If it is more than this, then you will need to file a self-assessment return.

You can claim expenses as far back as four tax years, so if you haven’t been using this tax break, then make the most of it now. Remember though, you will need to provide evidence for the expenses being claimed, so make sure you keep any receipts or bank statements to prove your case.

You can currently go back much further than normal to plug any gaps in your National Insurance Contributions (NICs) record. Voluntary Class 3 NICs can usually only be paid for the last six tax years if you have missed any payments for any reason, such as illness or redundancy.

However, you can currently go back as far as 2006 to fill in any gaps in your NICs record, but this will end on April 5. You need 35 ‘qualifying years’ when you retire to get a full State pension, and if you don’t have enough qualifying years, your pension will be lower.

If you have missed contributions due to childcare responsibilities, then you should have received National Insurance Credits after 2010, or Home Responsibilities Protection between 1978 and 2010. You could get a maximum of 22 qualifying years under HRP – which was automatically converted to NI Credits in 2010. But some records were not correctly applied, so if you think you or a family member may not be benefiting from a full HRP or NI Credits record, then you can apply online to make sure that all HRP years you should have received have been applied.

You should have had HRP applied if you were claiming Child Benefit for a child under 16, but it would also apply if you were caring for someone who was receiving other benefits. You can find out more about the eligibility criteria on Gov.uk.

Contact us

If you want to find out how to maximise your tax planning before the end of the tax year, and to ensure you have every qualifying year possible for your State pension, then please get in touch with us and we will do whatever we can to help.

National Insurance increases for employers from April 2025

One of the biggest announcements in the Budget was the increase in employers’ National Insurance Contributions (NICs) from April 2025, which will result in serious cost increases for the majority of employers affected. Employers will pay NICs on an employee’s earnings above £5,000 at the rate of 15%, but the employment allowance will be increased for some employers to £10,500 a year to help shield small businesses from the increase.

Employers currently pay 13.8% secondary class 1 NICs on the amount that an employee’s earnings exceed the secondary threshold of £9,100 per year – or £175 per week. But the secondary threshold will reduce to just £96 from April 2025 equivalent to £5,000, which will significantly increase the amount that employers need to pay.

The estimate is that this measure will raise around £25 billion from employers over the next five years.

How will this affect employers’ costs?

The larger NICs payments for employers is set to have a significant impact on many businesses. Around 250,000 businesses will see their NICs contributions decrease, but the vast majority – around 940,000 – will see it increase. A further 820,000 employers should see no change, according to Government figures.

The extra costs mean employers will pay an extra £770 in NICs for each minimum wage worker, and £900 more for workers on a median wage. These costs will need careful balancing against other expenses to ensure the impact can be absorbed without any detriment to the business.

The extra allowance for eligible employers could reduce their NICs liability to zero. The current £100,000 threshold for this extra allowance to apply will also be removed from April 2025.

Is there a way to offset these extra costs?

Businesses will be looking at ways to reduce the impact of these changes, and there is one thing that can be done. For example, salary sacrifice – also known as salary exchange – allows employees to direct some of their pre-tax salary to non-cash benefits. These can include pensions, or gym memberships, the cycle to work scheme, or even cars.

By using salary sacrifice, some employees may be able to save money on items they would otherwise buy from their taxed salary. The other benefit is that it will reduce the amount of salary an employee is deemed to have earned, and this can reduce the impact of the increase in employers NICs.

By diverting some of their salary to extra pension contributions, cycle to work schemes and gym memberships, there is a benefit to both the employer and employee, as they are buying these items through pre-tax income, which creates a bigger saving for them too.

We can help you

If you are likely to be affected by the NICs increase, then please get in touch and we will help you identify the different ways you can deal with this more effectively.

Tax relief claims on employee expenses changed

Employees on PAYE who need to make expenses claims can no longer currently make their claims online, and instead will have to use a postal system to deal with HMRC. Anyone who has out-of-pocket expenses for their job is entitled to claim tax relief on these from HMRC. Some people will do this on a self-assessment form, if they are self-employed or need to file a return for other reasons, or if they need to claim more than £2,500.

However, if they only have PAYE earnings and no need to file a self-assessment they will now need to file a P87 form and will need to provide supporting evidence for the claim by post. Many expenses will be reimbursed directly by the employer, which cannot then be claimed again with HMRC for tax relief. But if the employer does not reimburse all these expenses, which can include professional memberships or ongoing education, then these would qualify for tax relief.

Prior to October 14, 2024, the claims could be made by PAYE employees online, by phone or by post. But HMRC is currently insisting any claims are made by post, with relevant documentation sent to:

Pay As You Earn and Self-Assessment

HM Revenue and Customs

BX9 1AS

What exactly can you claim for?

There are myriad items that can be claimed for, and HMRC has outlined numerous examples along with the kind of evidence that would need to be included for the tax relief to be considered. These include:

• Subscriptions to professional bodies: copies of receipts, or other evidence, showing how much was paid for each subscription.
• Mileage allowance: a copy of a mileage log for each employment showing the reason for every journey and the postcodes for the start and finishing points.
• Hotel and meal expenses (subsistence): copies of receipts that show the date of the stay or meal, and the name of the hotel or restaurant.
• Expenses for working from home: evidence that the employee must work from home. This could be a copy of their employment contract or something else that explicitly states they must work from home. A claim for relief cannot be made if the employee chooses to work from home.
• Other expenses: a list of each expense showing the employments they are for, plus copies of receipts or other evidence showing the name of the item and the date the expense was incurred.

Source: HMRC

There are also some conditions that apply to making these claims, which include having to pay at least as much in tax as is claimed in the relevant tax year and providing evidence to support the claim. Exceptions to this include claims for uniforms, work clothing and tool flat rate expense claims. Some expenses will also be expected to be reimbursed by the employer.

Why has this change happened?

HMRC said it has “identified a growing tax risk driven by ineligible claims for employment expenses”, and that by changing the way the claims are made, it should “help people get their tax right first time, instead of focusing on correcting issues after they arise”. Employees need to be sure they are eligible to claim as HMRC will check this.

Any employees and agents of employees who currently have claims in process are being informed if these claims are being paused. But HMRC says it is working to reinstate the digital claims process as soon as it can. The process for submitting expense claims through self-assessment is unchanged.

The reinstatement of digital claims for uniform, work clothing and tool flat rate expenses for PAYE employees is expected to happen from the end of October, and for all other expenses by April 2025. If the claimant has more than one job, they must tell HMRC which employment the expense relates to, and whether any part of this was reimbursed by the employer. If it was, then evidence showing how much was reimbursed must also be provided.

We can help you

You should never pay more in tax than you need to, and there are various expenses PAYE employees can legitimately claim for. If you are unsure about what these are, then please get in touch and we would be happy to help you work this out.

New rules on tipping mean staff will get every penny

Business owners whose staff are given tips by customers must now ensure every penny given goes to the workers and none of it is kept by the business owner. The rule change, which came into effect on October 1, is expected to add around £200m to the pockets of workers in industries such as hospitality.

The changes require all tips, gratuities, and service charges to be passed to employees without any deductions. Any employer who fails to adhere to this can be taken to an employee tribunal. Most business owners do pass on all tips, but there are still some who fail to do this, something the Government deems “unacceptable tipping practices”.

Justin Madders, Minister for Employment Rights, said: “When you tip someone for good service, you expect them to keep all their tip. They did the work – they deserve the reward.

“This is just the first step of many in protecting workers and placing them at the heart of our economy. We will be introducing further measures on tipping to ensure workers get their fair share of tips.

“Britain’s outdated employment laws require an urgent update. This Government will ensure they are fit for the modern economy and deliver on our plan to Make Work Pay.”

Other measures to strengthen workers’ rights

This is just one measure on the cards to improve the rights of workers to ensure they are treated fairly by employers. Errant bosses can expect to be punished if they fail to meet the expected standards.

The Employment Rights Bill “will ensure workplace rights are fit for a modern economy, empower working people and drive economic growth” according to the Government. The aim is to create a balance between protecting workers’ rights and supporting businesses across the UK.

Ben Thomas, CEO of TiPJAR, said: “Our hospitality and service industries are powered by a wonderfully diverse and exceptionally talented workforce. For the first time, these millions of workers can trust that tips employers collect on their behalf will always be passed to them.

“As a business providing a platform to get tips to workers quickly, fairly and transparently, we wholeheartedly welcome today’s announcement. We look forward to continuing our work with the DBT and government to develop further guidance as the principles of the legislation are put into practice, supporting businesses across the sector to operate to a consistent and equitable standard in handling tips.”

You can find more information on the Code of Practice: Distributing tips fairly: statutory code of practice on Gov.uk, along with non-statutory guidance for employers on distributing tips fairly, also on Gov.uk.

Let us help you

If your business deals with tips and you want to find out how to make sure you’re meeting your legal requirements, please get in touch and we will be happy to offer you the help and guidance you need.

DWP makes slow progress on parents’ pension redress

The Department for Work and Pensions (DWP) is making slow progress on addressing State Pension errors for around 194,000 parents who are being denied a full State Pension because they have not had the correct information applied to their National Insurance records.

The problem relates to the Home Responsibilities Protection (HRP) which is an allowance provided to parents who have taken time out of the workplace to raise a family. HRP should be applied to the period of time these parents aren’t working, so they still qualify for a full State Pension when they reach retirement age.

However, a trawl of National Insurance data to resolve other issues – separate errors affecting more than 100,000 widows, married women and over 80s – highlighted the additional problem with the way HRP was applied.

How did this error happen?

The problem has arisen because before 2000, many Child Benefit claim forms didn’t include a National Insurance number, which is necessary to apply the HRP to the relevant account. The problem has been exacerbated by the fact that HMRC has destroyed old Child Benefit records, so it has to write to the people – primarily women – it believes are affected.

Even though HMRC began writing to potential victims last autumn, by the end of March, DWP had only assessed 419 cases out of the total 194,000 people expected to be affected. This means just £2.2m of State Pension arrears have been paid, with the final bill anticipated to reach around £1.15 billion.

Some very elderly pensioners have been encouraged to check via a website if they are eligible for the HRP to be added, so they can make a claim.

Why have so few claims been resolved so far?

Even where a successful claim for additional HRP is established, there is a long process to go through. First when HMRC has received a claim form, it needs to update that person’s National Insurance records, and then DWP needs to do a State Pension reassessment. This all takes time and is part of the reason why progress is so slow.

The saddest part of this is that a substantial number of those who missed out on their full State Pension have already died, so the payment would need to go to their estate. The best estimate from the DWP is that 151,000 people affected are still alive, but that 43,000 have already died. Many are now so elderly that there is a real urgency to fix the problem.

Steve Webb partner at LCP and former pensions minister, said: “Once the government realised that nearly 200,000 mothers may have been underpaid their state pension, action should have been taken to fix the problem with much greater urgency, especially as many of those who have lost out are now elderly. Instead, DWP has so far assessed fewer than 500 cases out of that total, and the exercise is proceeding at a snail’s pace. When the government talks about continuing the exercise into 2027/28 it is clear that this issue is not getting the priority that it deserves.”

What can you do if you think you might be affected?

If you think you might be one of the people affected by this error, you should get in touch with HMRC in the first instance and make your claim. Similarly, if you think one of your relatives may have been affected, but is no longer alive, you should also make a claim – or ask the person who was the executor of their estate to make the claim.

If you are not sure how to do this, get in touch with your accountant and they will give you the help you need to resolve this issue. In the first instance, you should ask the DWP for a State Pension forecast so you know how many full years of National Insurance contributions you have. You can get this online at Gov.uk. Even if this issue doesn’t impact you, you should still get a forecast from the DWP so you know what you will get when you reach State Pension age.

Contact us

There are many aspects of the State Pension you need to be aware of. So, if you want to plan properly for your retirement, then please get in touch with us and we would be delighted to help you.

Businesses look to increase home working

The number of businesses planning to increase home working for staff has risen according to the latest official figures. In late May 2024, around one in five (19%) businesses said they either had or were intending to raise the number of staff who are working from home, with more than half citing the reduction in business overheads as their reason for the change.

Home working has become more popular since Covid, as more people realise the flexibility it offers them, and companies realised how much could be saved by allowing staff to work offsite. The largest number of respondents to the ONS Business Insights and the Impact on the Economy survey that were looking to increase home working were in London, with 28.8% of businesses there saying they wanted to move or had moved in that direction. The lowest number was in Northern Ireland, where just 19.2% of the companies surveyed said they had or planned to increase the number of staff working from home.

What does a shift to home working bring?

For many employees, homeworking provides a much better way to run their lives. They tend to have more flexibility around what they can do and when – such as fitting in a school run around online meetings – and will often be more productive as a result. After all, there is no-one to have a chat with at the water cooler in the office.

However, for others, the downside of homeworking means they lose out on social interaction that they crave, and it can be difficult for some people to ‘switch off’ from work. This is something that needs to be regimented, otherwise employees can suffer from burnout, and become less effective at their job.

For employers, there are lower overheads as they need to provide less office or other workspace for their employees, which can create big savings for a business. That said, employers still have a responsibility to ensure their employees have a good working environment, and this could include providing good-quality office furniture, such as desks and chairs, to ensure they are not at risk of injury. Employees must also do what they can to prevent injury in the same way as they would if they were in an office environment. More information can be found on the Health and Safety Executive website.

What can I expect from my employer if I work from home?

Remote working has its benefits for both the employer and the employee, but there is a lot to consider on both sides if this is put into practice. For example, it will be harder for an employer to see if you are becoming excessively stressed or overloaded by work, so good communication is vital.

Being open with your employer if you are overburdened or feel stressed is essential, because otherwise they will not know and would be unlikely to help. Keeping in regular contact with your employer and colleagues will help to keep things on an even keel and will ensure you have social interaction during the working day. It may be tempting to hide any excessive stress from an employer when you are working from home, but this won’t help either party at the end of the day. So, be upfront – your employer has the same obligations for your health and wellbeing outside of a site office as it would inside one.

One thing to also consider is whether you need to update your home insurance to cover you for working from home. Usually, you don’t need to change your insurance unless you have people coming to your home for meetings or to buy products. If you are simply doing office work from your home, the chances are you won’t need to change anything. But check with your insurer, just in case. Remember, you may have more expensive equipment in your home supplied by your employer, so you should at the very least make sure this is covered on a policy.

If you need to pay any extra in insurance, then you can ask your employer to pay this additional premium for you. You may also be able to claim some tax relief even as a PAYE employee for using your home for work, such as the cost of electricity related to work activities. This is all worth checking with your accountant as these bills can add up.

We can help you

If you are an employer or employee who is considering increasing the amount of home working you or your staff do, then please get in touch with us and we would be happy to help you identify additional savings and costs that could be created as a result.

Employer-run, relief-at-source pensions must submit return by July 5

Employers who run their own pension schemes and operate on a relief at source basis must file their return for the previous tax year by July 5. It is vital the information on the return is correct and complete, otherwise HMRC will consider the return to be incomplete even if filed on time.

You must also file form APSS590 to confirm the information within the return is true and complete. The return relates to contributions made in the previous tax year up to April 5.

How do I file the return?

HMRC is happy for you to file the return in an Excel spreadsheet which is pre-formatted to the correct structure for the return. To help you get the return right, HMRC’s pre-formatted spreadsheet will include conditional formatting, which means:

If you’ve entered too many characters in a cell, the spreadsheet column header in rows 1 and 2 will:

• Turn red.
• Stay red until you have corrected the errors.

If you submit the spreadsheet to HMRC without removing the excess characters:

• Your submission will automatically fail and the return will continue to be outstanding.
• You’ll need to resubmit an amended spreadsheet.

The spreadsheets:

• Are in Excel version 2010 (.xlsx).
• Can accept 1,048,576 rows of information.
• Have conditional formatting that detects if the specification requirements have not been met.
• Cannot check the accuracy or suitability of the data entered and the return may still fail when HMRC process this.

Source: Gov.uk

You need to send the return through the Secure Data Exchange Service (SDES), and you can contact the pension schemes helpline if you need any help or have any problems complying with the return requirements.

Let us help you

Pensions and meeting your tax reporting requirements as an employer can be complicated, but we are here to help. Please get in touch and we will be happy to offer you the help and guidance you need.

Tipping Act Code of Practice to bring fairness to employees

Whenever you leave a tip in a restaurant or a hairdressing salon, for example, you would hope that the tip money you left will go directly to the person who provided you the service you are tipping for. But for many restaurants and other industries, that hasn’t always been the case.

So now, the Government is working on draft legislation known as the ‘Tipping Act’ to bring fairness to sectors where tipping is common, to ensure the people who were being paid the tip get it.

What is currently happening?

In some restaurants, the tips paid by card especially, and sometimes those paid in cash, are controlled by the owner. This means the tips may not reach the workers as intended by the people who left them. The Act intends to change this, by ensuring all employers abide by a Code of Practice which will dictate how the tips should be handled.

The list below includes some of the factors considered by employers, but this isn’t an exhaustive list:

1. Type of role or work, for example, distribution between front of house and back-room workers.
2. Basic pay (and how workers are engaged).
3. Individual and/or team performance.
4. Seniority or level of responsibility.
5. Length of time served with the employer.
6. Customer intention.

Source: Gov.uk

There are various elements to the consultation, and any company that deals with customer tips should be considering what might be expected of them.

Are tips taxable?

For those people who begin getting tips where they weren’t before, there will be a tax implication to consider. All tips are subject to tax, even if they are paid to you in cash. So, you will need to declare these tips to HMRC and pay any money that is due.

Remember, if the tip has been paid as an additional amount on a card, for example, there will also be a paper trail that will allow HMRC to investigate how much money has been tipped within each business. So, if you aren’t sure what to do, you are best to seek advice.

We can help you meet your obligations

If you are going to be dealing with tips and the tax implications of them, whether as an employer or employee, then please ask us for advice and we can explain what you need to know.

Employees paid on a Thursday or Friday could face extra tax in 2024/25

Thousands of people in the UK who are paid weekly could find themselves making extra tax payments this year if they are paid on a Thursday or Friday. Employees paid on Thursday 4 April or Friday 5 April may need to pay extra tax as they would have received 53 payments in the 2024/25 tax year rather than 52, the Low Incomes Tax Reform Group (LITRG) has warned.

Even those paid fortnightly or even every four weeks could also be caught in this tax trap, which may result in HMRC looking to clawback unpaid tax.

Why will these people owe more tax?

HMRC allows employers to give an additional amount of Personal Allowance to the people affected, according to the LITRG. But because of this, they will have underpaid tax based on their income for the entire tax year. So, HMRC is likely to clawback this money unless it uses its discretion to not chase smaller amounts.

For those caught who are paid every two weeks or every four weeks, the amount they would need to pay back to HMRC would be larger, which could lead to difficulties if they aren’t planning for the bill.

Meredith McCammond, Technical Officer for LITRG, said: “Where employees are paid weekly, the PAYE system is designed to assume you are paid 52 times a year. Each week, you get a 1/52 proportion of your tax-free personal allowance (£242 a week). By the end of the tax year, this means that normally you would pay the right amount of tax.

“But for years in which 53 paydays fall, as happens this year, if you are paid at the end of the week on a Thursday or Friday, the system gives you an extra £242 chunk of tax-free personal allowance.

“When HMRC later works out how much tax these employees owe for the year compared to how much has been taken off their wages, it may show that not enough tax has been paid overall. For a basic rate taxpayer, the amount would be just under £50. As it is not significant, HMRC may choose not to collect this.

“However, the amount owed could be significantly higher if you are paid fortnightly or four-weekly, with almost £100 being owed by the former and £200 by the latter. In these circumstances, it is likely HMRC will try to collect it.”

How will I know if I owe HMRC money?

At the end of each tax year, HMRC will send out what is known as a P800 which details any tax due. If you are affected by this anomaly in the 2024/25 tax year, then you would receive one of these notifications.

If you receive one, whether for this reason or any other, then you should always check with your accountant if the calculation is correct. HMRC is fallible, and it can make mistakes that cost you money. So, always double check the calculations before you make a payment to be sure that you aren’t overpaying.

If you are still employed, then your PAYE code might be adjusted to take account of the money owed during the next tax year. But if you are no longer working, then you would have to make the payment to HMRC directly. Either way, you should speak to your accountant for guidance.

To be clear, anyone who is paid on any other day of the week either weekly or fortnightly, or who is paid monthly – as opposed to every four-weeks – will not be affected by this.

We can help you

If you think you might be affected by this tax trap, then please get in touch with us and we will be happy to help you.

Everyone should check their tax code now

HMRC will provide new tax codes at the start of every new tax year if the Personal Allowance has changed, if someone has had a change of circumstances, including perhaps had a pay rise, and even to those who are taking their pensions for the first time.

It’s important to check that your tax code is correct, as any mistake early in the year could mean paying too much or too little tax going forwards. Either way, the sooner you get this sorted out, the better, as you don’t want to be owed money by HMRC, and you certainly don’t want to owe unpaid tax.

How can I check my tax code?

There are various ways you can check your tax code, including speaking to your employer or your HR department, if your company has one. You can also look online to see what all the elements of the tax code mean and identify whether you think these have been applied correctly to you.

For example, 1257L is the code that most people will have if they have a job or a pension. This represents the £12,570 Personal Allowance that each person has – unless it is eroded away for those who are in the highest tax bracket. The ‘L’ denotes that you are entitled to the full tax-free Personal Allowance.

The numbers in the tax code indicate the amount of Personal Allowance you have, while the letters represent a variety of things. You can find a full list on Gov.uk. But if you would prefer to get an expert to check it for you, then get in touch with your accountant.

Let us help you

If you need any assistance checking your tax code, please get in touch and we will be happy to offer you the help and guidance you need.

650,000 extra pensioners pay tax for the first time this month

Around 650,000 pensioners are facing the prospect of paying tax on their pensions for the first time from this month thanks to a big boost to the State Pension from April 6, and frozen tax bands that will drag them into the tax net, according to calculations from Lane, Clark and Peacock (LCP).

The 8.5% boost to the State Pension from this month comes thanks to the so-called ‘triple lock’ which raises the State Pension this year by £902.40 to reach £11,502.40 from April 6. The triple lock guarantees that the State Pension will rise each year by the rate of inflation, average earnings growth or 2.5%, whichever is greater.

This is the second year in a row with a major boost to the State Pension’s value, after a previous 10.1% rise in the State Pension between 2022/23 and 2023/24. The tax charge for so many people arises because the Personal Allowance has again been frozen at £12,570, and if they have other pension income then they will be pulled into the tax regime. This is something known as ‘fiscal drag’ and these pensioners will see a cut in the actual amount that goes into their pocket.

Where have these figures come from?

HMRC’s own figures show that the number of people aged over 65 who pay income tax rose by three quarters of a million, up to 8.5m in April 2023 from 7.73m the previous year. The rise of 8.5% would be expected to increase that number still further, to 9.15m, which gives an increase of 650,000 according to LCP.

There was speculation around whether the Government would continue with the triple lock, but with a General Election at some point this year, and a lot of older voters voting Conservative, it wasn’t surprising to see another significant rise. Yet the ‘stealth tax’ achieved by freezing the Personal Allowance will help to clawback some of this largesse.

Steve Webb, former pensions minister and partner at LCP, said: “In terms of the triple lock policy, with a General Election in the offing, it seems quite inconceivable that the government would choose to break the triple lock promise for a second time in three years. Such a decision would be like aiming a laser-guided missile at the core of Conservative support and could fatally undermine the party’s electoral prospects.

“What is far less clear is what each party will do when it comes to their manifesto. In 2017, Theresa May removed the triple lock from her manifesto but was forced to reinstate the policy as part of her post-election deal with the Democratic Unionists. In 2019, Boris Johnson decided it was preferable to reinstate the policy. There is no doubt that the present government and opposition would both like to drop the policy in order to make savings to be spent elsewhere. But both want to avoid a situation where they have moved first by dropping the triple lock only to find that the other party has retained it.”

What should people who are due to pay tax on their pensions do?

As this will be the first time many of these pensioners will be taxed on their pension, it’s important to ensure they are paying the correct amount of tax by checking they have the right tax code. This is something your accountant can help you with.

This is something that should be checked no matter where your pension income is from to make sure you are not paying too much or too little tax. More than £42m in the first quarter of 2024 alone has been repaid by the taxman to pensioners who were taxed more than they should have been when taking flexible benefits from their pension, according to HMRC’s own figures. The average rebate to pensioners in this period was £3,167 according to calculations from Quilter.

Some of this tax overpayment could reflect people taking larger amounts from their pension during the height of the cost-of-living crisis. But this is still a very large amount of money that shouldn’t have been taken from pensioners in the first place.

Ian Cook, chartered financial planner at Quilter, said: “More than 13,000 claim forms were processed in Q1 2024, and those needing access to their funds are faced with an archaic system that over-taxes them and leaves them waiting unnecessarily before they can access the full amount they are owed. This is due to an oddity within the PAYE system which means they are placed on an emergency tax code when they first withdraw from their pension pot. For those who need to access their funds quickly, this can present a significant hurdle.

“This has caused a significant issue for those who are accessing their pension funds for years and has been exacerbated by the strain that the cost-of-living crisis has had on people’s finances over the last year or so. The system is desperately in need of an overhaul as, at present, the process is leaving people facing unnecessary emergency tax and adding additional strain at a time when many are still struggling with the cost of living.”

How can you stop this happening?

As soon as you can, you need to make sure you have the right tax code. This is something your accountant will be able to check for you, and it can save you a lot of heartache waiting for money that is better in your pocket than the taxman’s.

Many people find dealing with HMRC intimidating. But you should only pay the amount of tax due, no more and no less. So, if you think something is wrong, or you have less money in your pocket when you first take your pension that you expect, then challenge it. Your accountant can help you, and it will save you having to wait months to get that money back.

Your accountant can have these conversations with HMRC on your behalf which will make it less likely that you will overpay tax. One tip is to make several smaller withdrawals as you need them, so you don’t face an incorrect tax code on an initial lump sum. This way, there is time to update the tax code so you’re off the emergency code before you withdraw more money.

Contact us

If you want to know how to make sure you don’t pay more in tax than you need to on your pension, then please get in touch with us and we would be delighted to help you understand your tax position.

The end of the P11D is expected in 2026

The P11D form which has been used to process ‘benefits-in-kind’ such as loans for season tickets and company cars will no longer be used after April 2026, as HMRC will ask businesses to deal with all these benefits through the payroll instead.

HMRC announced earlier this year that the regime for dealing with the taxation of benefits-in-kind would change as it works to simplify the tax system. HMRC plans to automate the processing of these claims through the payroll instead, which should mean these claims are processed more quickly for employees.

What changes have been decided?

Even though HMRC is planning much further ahead than has happened in the past, it still needs to produce guidance after working with industry experts. There are still some complexities that will need to be resolved before all benefits can be dealt with through the payroll. But once this is complete, it should simplify the tax affairs of 3m people and reduce the need for them to contact HMRC.

The administrative burden should also be reduced for thousands of employers, according to HMRC, as it will remove the need for 4m end-of-year returns to be submitted. The guidance “will be made available in advance of 2026,” HMRC said.

Employers will need to be ready to change their systems to deal with these changes and should keep a close eye on the employer bulletins from HMRC as they appear, and stay in close contact with their accountants so they are ready.

Let us help you

If you need any help with changing your payroll systems to get ready for the P11D changes in 2026, please get in touch and we will be happy to offer you the help and guidance you need.

Big plans for private and State Pensions

Pensions are set to have one of the biggest overhauls in recent memory, as the Chancellor also announced a consultation on plans that would bring significant changes to pensions in the UK. The biggest change would be a Lifetime Pension, more colloquially known as a ‘pot for life’ – where someone would choose the pension plan that suits them best, and every employer would then pay into that plan rather than the employee being put into the employer’s scheme.

The obvious benefit is that you are less likely to lose this pension, as it will be the only one that you need to have during your working life. The downside, according to experts, is that it will increase the employers’ costs of providing pensions to employees, as they would need to pay into multiple pensions for different members of their workforce. Paying into a single scheme, which is the current system, is much simpler for employers as they have one block payment to make each month. However, these pensions often get forgotten about by employees as they move from job-to-job.

Triple lock stays, with State Pension up 8.5%

There was concern before the Autumn Statement that the triple lock, which uprates State Pensions each year by the highest of average earnings growth, inflation, or 2.5%, might disappear given the high levels of inflation we have seen in recent months in the UK.

However, Jeremy Hunt chose to keep the triple lock, and the State Pension will be increased by 8.5% from April 6, 2024, meaning someone on the new State Pension will see their weekly income rise from £203.85 to £221.20. Anyone who reached State Pension age before 2016 will see their pension rise from £156.20 to £169.50 per week.

This is one of the largest State Pension increases in cash terms and will go some way to helping pensioners who have been struggling with the cost-of-living crisis.

Tax on pensions passed on after death to be scrapped

The Government has also had a change of heart when it comes to pensions passed on after death. The Chancellor announced that pensions passed to beneficiaries if someone dies before they reach age 75 will not be taxed.

The original plan, announced by HMRC in the summer, was to tax any income taken from a pension pot through drawdown – where an income is taken from the underlying fund over a period of time – or from an annuity, would be taxable. This announcement reverses that decision, and HMRC has now confirmed these payments will continue to be tax free from April 6, 2024.

Under the current rules, a defined contribution pension pot can be transferred to beneficiaries tax-free if the original owner of the pension dies before they reach 75.

The Chancellor also re-confirmed that the Lifetime Allowance – which limited the amount of money you could build up in your pension over your lifetime, including all contributions and investment returns to £1,073,100 – will be removed from April 6, 2024.

We can help you meet your obligations

Pensions are complex and whether you are an employer, employee or self-employed, you should know what you can do to maximise your retirement savings. If you would like more information on this, then please get in touch and we will explain what you need to know.

Christmas party with a gift of tax breaks

Yes, it’s that time of year again! Christmas is on the horizon, and the office Christmas party planning will be in full swing for many companies across the UK. So, if you are planning a shindig for your employees, you should maximise the tax breaks available from HMRC, and make sure you don’t fall foul of the rules and fail to pay what could be due to the taxman.

If you want to have a party that can benefit from tax breaks, then there are a few rules you need to follow. The party needs to cost less than £150 per head – providing you haven’t had any other parties during the same tax year. The exemption of £150 per person applies across the year, so if you have had a summer barbeque for example, which cost £60 a head, then you only have £90 per person left to spend on the Christmas party.

The party must be open to all

The parties must be annual – like the Christmas party – and must be open to all employees, otherwise they will not be considered exempt by HMRC.

If you happen to have various offices around the UK, then it is fine to have different parties in different places, as long as all members of staff are able to attend one of them. If this is the case, then you will still benefit from the tax exemption.

One other thing to consider is that if you have staff who are on Salary Sacrifice arrangements within your business, then you need to inform them of how much each social occasion is worth to comply with the rules.

Remember, if any of the events you have put on for staff throughout the year don’t count as being exempt, then you must report all costs to HMRC and you will be liable for National Insurance payments on those amounts.

Each employee will need to have the cost reported to them on their P11D form, and the employer will need to pay Class 1A NICs on the amounts.

You can find out more about your obligations on the Gov.uk website, which is the best way to ensure you don’t end up with a financial hangover.

Let us help you

If you want to know what you can and can’t do in terms of the cost of your Christmas party, then please get in touch and we will be happy to offer you the help and guidance you need.

Autumn Statement NICs changes in detail

The biggest tax cuts announced by the Chancellor in his Autumn Statement were in NICs, where self-employed people will no longer pay Class 2 NICs at all from April 6, 2024. Class 4 NICs will be reduced from 9% to 8% from the same date. Class 1 employee NICs – which apply to employees working under PAYE – falls from 12% to 10% from January 6, 2024.

The removal of Class 2 NICs means anyone who is self-employed and has profits above £12,570 will no longer need to pay Class 2 NICs, but they will still receive access to the contributory benefits associated with these payments in the past, such as the State Pension. Benefits will also still be accessed for those self-employed people with profits between £6,725 and £12,570 through a National Insurance Credit. Those who have profits below £6,725 can still make voluntary NICs if they want to.

What is happening for PAYE earners with NICs?

Employees aren’t being left out of the Chancellor’s largesse either – Class 1 NICs is being cut from 12% to 10% from January 6, 2024. The NICs cuts overall will cost the Treasury around £9 billion and put an extra bit of cash into the pockets of around 29m workers in the UK.

Those earning £20,000 a year will keep an extra £149 per year if they are employed, or £254 per year if they are self-employed. This rises to £754 and £556 respectively, when both the employed and self-employed reach £60,000 according to expert calculations.

However, the effect of freezing tax thresholds more than wipes out the benefit from the cuts announced, as the overall tax take has risen to its highest level for 70 years. The cut to the additional rate threshold to £125,140 at the start of the current tax year, will earn £29.3 billion for the Treasury by 2027/28, according to the Office for Budget Responsibility – the equivalent of increasing the basic rate of income tax by 4p. So, it is a little like giving with one hand while taking with the other.

Veterans NICs relief for companies extended

However, employers who hire Armed Forces veterans will be able to continue to claim relief for longer than expected on the secondary Class 1 NICs due on the wages of veterans for the first 12 months of their civilian employment.

HMRC said: “The relief applies to earnings up to the Veterans Upper Secondary threshold, which is £967 per week.”

To qualify for the employers’ relief, the veteran being employed must have been in the UK regular Armed Forces. The relief is available until April 5, 2025.

Rising costs hit Brits hard

Despite these welcome cuts to NICs providing some benefit to workers, the rising cost of living is outpacing the benefits, based on calculations from the Office for Budget Responsibility which shows how much we will each be paying to cover ongoing debts, especially our mortgage debts.

The OBR forecasts that the cost of servicing household debt will rise from £73 billion in 2023 to £151 billion in 2026. This is higher than the peak of 2008, when the debt figure was £98.3 billion. The Liberal Democrats have calculated that the typical household will soon be spending £5,350 per year to “service” their debts, including mortgages which have seen rates rise significantly along with the Bank of England base rate over the past year.

Liberal Democrat Treasury Spokesperson Sarah Olney MP said: “This is a horror show for Brits. There is no end in sight to the mortgage nightmare faced by millions. Not only have household finances been clobbered by a barrage of tax rises, but now they face household debts not seen since the financial crisis.

“The blunt truth is that any tax cut before the election will be more than cancelled out by the mortgage bombshell.”

We can help you

If you want to find out whether you are going to be better or worse off with the NICs changes, or you need some help or guidance to deal with rising mortgage costs, then please get in touch with us and we will be happy to help you.

How to spot tax avoidance schemes

Thousands of people found themselves caught up in the IR35 tax avoidance problems, where freelancers who were earning through a limited company set up to deal with their income were deemed – retrospectively – by HMRC to have been involved in tax avoidance. In short, if most of or all their income came from a single organisation, then HMRC argued they should have been directly employed by that organisation, and not allowed to pay themselves through their own business in dividends, as they would have paid less tax than someone directly employed.

While the fallout from IR35 continues – many are paying back huge sums to the taxman, while some have seen marriages fall apart and have even taken their own lives because of the pressure they have been under – there are many other tax avoidance schemes that HMRC has already shutdown.

Now, HMRC is running a campaign designed to help you spot a tax avoidance scheme to help prevent you getting into similar difficulties.

Is HMRC really trying to be helpful?

The campaign is specifically asking if you think you might be involved in a tax avoidance scheme, and is offering you the option of getting in touch directly with HMRC by email if you feel you might be.

The taxman goes on to say: “We’ll support you. We can help you get out of the scheme and settle your tax affairs. Ignoring the problem is not the answer. The longer you leave it the bigger the tax bill.

Our aim is to get you back on the right track. No judgement. Simply offer you the support you need. And if you can’t afford to pay everything in one go, we may be able to offer you an instalment arrangement.”

If you are paid by a single employer through PAYE, then you are probably not in a tax avoidance scheme, but check the money put into your account is the same as the net amount on your payslip. If there is any difference, then question this and find out exactly why it has happened.

You should also check if you receive any additional payments, such as untaxed loans or capital advances. This could potentially be another red flag.

Is there a list of schemes I should avoid?

HMRC does produce a list of schemes it has identified as tax avoidance schemes, but makes clear this list is not a full list of the schemes in operation.

You may think only higher earners are in these schemes, but you would be wrong. Even though some of the biggest names that have been involved in tribunals with HMRC include the likes of Gary Lineker and Eamonn Holmes, everyone from doctors, nurses, and teachers have been touched by the IR35 net. So, it is best not to be complacent.

What is an umbrella company and how do they work?

If you do temporary or contract work through a recruitment agency, you may find yourself working for what is known as an ‘umbrella company’. Usually, this is a company that employs you to do the work for clients you’re connected with through the recruitment agency.

The umbrella company will be your ‘employer’, even though the work you do will be carried out for a client of the agency that sourced the work for you. Typically, you will sign up with the agency, contracted to work for the umbrella company, and then do the work for the recruitment agency’s client. In this arrangement, you must receive at least the national minimum wage and holiday allowance in this arrangement.

You will send your work sheet to the recruitment agency, which charges the client for the hours you have worked, and this money is paid to the umbrella company which then pays you. The structure is quite complex. Remember to always check that any payments made into your account match the net pay on your payslip, and if there is any difference – higher or lower – then you should query this with the recruitment agency.

Not every umbrella company is a tax avoidance scheme, but HMRC says it could be a tax avoidance scheme if you get:

• A separate payment which you are told is not taxable, such as a loan.
• More money paid into your bank account than is shown on your payslip.
• A payment from someone other than your umbrella company, which has not been taxed.
• Asked to sign another agreement in addition to your employment contract.

Source: HMRC

If you aren’t sure whether you are working for an umbrella company or not, then you can use the online risk checker tool to get more information.

We can help you

If you want to be sure you are staying on the right side of the law when it comes to your tax affairs, then please get in touch with us and we will be happy to help you.

Tax advice error could impact your State Pension

Group income protection policies taken out through employer salary sacrifice schemes have been wrongly treated for tax thanks to incorrect advice given by HMRC to the Association of British Insurers back in October 2019. Even though HMRC corrected this advice in August last year, there could be a number of people who haven’t paid enough National Insurance (NI) contributions for the period in question.

You could be affected if you have received, or will receive, income from a group income protection policy which was “not fully subjected to National Insurance contributions, as it would have been under the correct taxation position” according to HMRC.

As a result, some people may not have paid enough NI to qualify for full benefits of, for example, the State Pension.

What is HMRC doing about this?

Anyone who thinks they may be affected are being asked to check their NI record for the period of time they received the relevant income, to check if they made the correct NI payments. If not, then you should contact HMRC as soon as you can.

HMRC will check the details of each case individually, and you will find out if you need to make these additional payments.

If there is a shortfall in your NI record for any of these years, then you should contact HMRC if:

• You made contributions to a GIP policy by way of salary sacrifice.
• You received sick pay from your employer under that GIP policy and that sick pay was not fully subjected to National Insurance contributions.

Source: HMRC

If necessary, then HMRC will rectify any shortfall to mitigate any impact on a contributory benefit, such as your State Pension.

Will I have to pay more tax?

The incorrect information was provided by HMRC to the ABI in the first place, so for most people there will not be “any revisit to the tax treatment of the payments you received”.

HMRC states that the incorrect guidance would most like have been relied upon by:

• Employees entering into or deciding to remain in sick pay arrangements via salary sacrifice after October 15, 2019.
• Payers and payees considering the tax treatment of sick pay payments made after October 15, 2019, where they derived from salary sacrifice arrangements.

HMRC added: “[We] will therefore not seek to revisit the tax treatment where customers have relied on the previous guidance in the following cases:

• Where sick pay payments were made to employees or former employees without deduction of tax between October 15, 2019, and December 31, 2023, inclusive to the extent that they are (or are derived from) amounts that can be or have been attributed on any just and reasonable basis to salary foregone by employees in periods starting on or after April 6, 2017.
• Where repayment claims (including overpayment relief claims and PAYE adjustments) were made between October 15, 2019, and December 1, 2022, inclusive to the extent that these claims related to sick pay payments made to employees or former employees and are, or are derived from, amounts that can be attributed on any just or reasonable basis to salary foregone by employees in periods starting on or after April 6, 2017.
• Sick pay payments made on or after January 1, 2024, will be accepted as non-taxable to the extent that they are made or are derived from amounts that can be attributed on any just or reasonable basis to salary foregone by employees between October 15, 2019, and December 31, 2023.”

Source: HMRC

In short, it will “assume that customers have relied on the October 15, 2019, advice unless details of the claim indicate there was no such reliance”.

We can help you meet your obligations

This is a complicated set of circumstances, so it is understandable if you are not sure whether you have been affected or not. But if you think you may have been, then please get in touch and we will explain what you need to know.

Redundancies expected to rise this year – what you need to know

The latest official figures show that redundancies are on the rise this year. Expected redundancies are up from 22,525 in June to 23,975 in July, based on the number of HR1 forms filed to HMRC. While this data lags behind real-world figures because of the way it is collated, many big companies have already announced redundancies.

The biggest so far includes Wilko. Its collapse has put around 12,500 jobs at risk. But it is far from alone in making layoffs. Deloitte is expected to lose around 800 of its UK staff, while even behemoths like Google, Amazon, Yahoo and Meta have made redundancies this year. As early as February, the Retail Gazette highlighted that 15,000 jobs in retail had been cut by the time this story was published.

Employees can do little to avoid the cull, but the least you can do is understand what you can expect from your employer. If you’re an employer, then you also need to understand your legal obligations.

Responsibilities of an employer

Let’s start with the employer’s responsibilities. To make a person or people redundant, their job or jobs must no longer exist. If this isn’t the case, it won’t be considered a genuine redundancy. Then you must choose who to make redundant.

This must be carefully considered, especially if you are making compulsory redundancies, as the people you choose must be chosen fairly. For example, under the Government’s fair selection criteria, you can consider:

• skills, qualifications and aptitude,
• standard of work and/or performance,
• attendance,
• disciplinary record.

Source: Gov.uk

You can use the ‘last in, first out’ approach legally too, providing it doesn’t unfairly impact one group over another. However, you cannot choose people based on:

• pregnancy, including all reasons relating to maternity,
• family, including parental leave, paternity leave (birth and adoption), adoption leave or time off for dependants,
• acting as an employee representative,
• acting as a trade union representative,
• joining or not joining a trade union,
• being a part-time or fixed-term employee,
• age, disability, gender reassignment, marriage and civil partnership, race, religion or belief, sex and sexual orientation,
• pay and working hours, including the Working Time Regulations, annual leave and the National Minimum Wage.

Source: Gov.uk

For voluntary redundancies, you must be clear about how you are going to choose people, and ensure they understand you may not give them redundancy just because they applied for it. Another way to reduce staff numbers voluntarily is to offer people incentives to take early retirement. This must be offered across the entire workforce to comply with legislation. But you can’t force someone to retire early.

At all times, good communication between employers and employees is paramount, so everyone knows where they stand, and trust is maintained.

What employees need to know

Employees want to know they are being treated properly, and there are different rules employers must follow depending on how many redundancies they’re making. If it is less than 20, there are no hard and fast rules, but you should still be fully consulted on plans and kept informed of what is about to happen.

If more than 20 people will be made redundant within the same ‘establishment’ as the Government puts it, within a 90-day period, then the company must go through a ‘collective consultation’. Staff or union representatives should be informed initially if they are in your workplace, or the company must speak directly to the staff.

The consultation period must last for at least 30 days if 20-99 people are being made redundant, or 45 days if it is 100 or more. Once this is done, then you will be given notice of your redundancy. At the very least this should include:

• the reasons for redundancies,
• the numbers and categories of employees involved,
• the numbers of employees in each category,
• how you plan to select employees for redundancy,
• how you’ll carry out redundancies,
• how you’ll work out redundancy payments.

Source: Gov.uk

How is redundancy pay worked out?

How much redundancy pay you will get depends on a variety of factors, but there are rules around the minimum statutory redundancy pay that should be offered. For example, anyone not under an employment contract, those with the company less than two years, and those who have taken early retirement won’t get statutory redundancy pay. Your employer may still pay you, but it is not compulsory.

Any employee receiving redundancy pay should be told exactly how it has been worked out in a written statement. The statutory redundancy pay rules allow for amounts equivalent to:

• 5 weeks’ pay for each full year of employment after your 41^st birthday,
• one weeks’ pay for each full year of employment after your 22^nd birthday,
• half a weeks’ pay for each full year of your employment up to your 22^nd

Source: Gov.uk

The length of service is capped at 20 years under these rules, and the amount you will receive is based on the average of the amount you earned in the previous 12 weeks prior to you being made redundant. Even so, weekly pay is capped at £643 per week, and the total statutory redundancy payout is capped at £19,290. But remember, your employer can decide to pay you more, or you may be able to negotiate more.

This payment should be made when you are made redundant, but if not, or your employer doesn’t agree with the amount, you have up to three months to claim the payment due from an employment tribunal. So, even though this might be an emotional time, keep your eye on the calendar to make sure you don’t miss out. The good news is that even if you miss this deadline, the tribunal would have up to six months to decide whether you should receive the money.

We can help you

If your business needs to make redundancies, or you’re an employee about to be made redundant, please get in touch with us and we will help to either make sure you are complying with all of the relevant regulations, or receiving what you expect.

Back to work means it’s time for business development

For most people the summer holidays will be firmly in the rearview mirror by now and they will be starting to focus on the year ahead. One way to make sure next year will be one to remember is by putting some effort into business development now, so you can start 2024 in good shape.

The EY Item Club said earlier this summer that it expects the UK economy to grow by just 0.8% in 2024, so the sooner you start working on how you can connect more effectively with your customers, whether your business is B2B or B2C, the more chance you have of boosting your profits.

Autumn is a great time for business development, as the months ahead of Christmas are key for many businesses because they plan their budgets and allocate finances to projects the following year. Getting in front of the right people now could give you a better chance of securing a piece of the pie.

Where’s the best place to start?

Most businesses will be doing some form of business development on a regular basis – and if yours isn’t, then this is something to address. Becoming complacent and relying on your current client base to keep your business afloat is a risky strategy.

If you’re new to this, then one of the best places to start is by identifying what your customer looks like. Literally. This may sound extreme, but considering who your customer is, what they are interested in and what they are going to want to spend their money on is the ideal way to target the people or businesses you want to work with.

For example, is your business selling primarily to people or other businesses locally? Could you expand your reach online? Are your customers UK-based, or can you sell your products or services globally? Once you know the answers to these initial questions, you can begin to establish who your customers are.

Where do I find them?

The next step is talking to them. This could be through advertising locally, or perhaps you could harness the power of social media to spread the word about your business. For example, LinkedIn is a great place to do some networking whether your business is B2B or B2C, or both.

Other social media sites, such as X, formerly known as Twitter, Instagram, Facebook, TikTok, Threads and so on, can be just as useful. But you will need to create regular content for them to be effective. This can take time, although there are now some useful AI tools that can do some of the heavy lifting for you. For image creation, you could check out Midjourney, or if you already use Hootsuite to manage your social media channels, then check out its AI content creator OwlyWriter AI.

AI tools aren’t perfect, but they can help take away some of the difficulties that come from starting with a blank page and give you some content to work with. You can even use AI tools to run ads for you now, just be sure you keep a keen eye on how well they are working. This is your brand we are talking about here.

I don’t like social media, what else can I do?

If you’re not a fan of social media, there are plenty of other ways to meet and greet potential new partners and customers. Check out any local trade fairs that are happening and see what it costs to go as a delegate or to exhibit. The latter will usually cost more, so do your research carefully to see who will be there so you know your efforts and money won’t be wasted.

Other business development can be done through business associations, such as the local Chamber of Commerce, or through networking at more social events, such as during a round of golf or at a tennis club.

Once you get into the swing of your business development, use a customer relationship management (CRM) system to keep on top of those conversations and important contacts. This will help you track and action anything you need to so those opportunities don’t get left to wither on the vine. Different CRMs have various pros and cons, so again do your research carefully.

Contact us

If you are considering spending money on your business development, then get in touch with us first and we will help to make sure you are getting the right tools for the job.

Pension tax overpayments – £56m returned in Q2 2023 alone, so here’s how to claim

People making the most of flexible pension withdrawals have been facing tax overpayments due to miscalculations by HMRC. In Q2 2023 alone, the taxman repaid £56,243,842 to people who had been taxed more that they should on their pension withdrawals. This amounts to an average of £3,551 per person.

The figure is up nearly £8m on the amount overpaid in the first quarter of the year and is nearly double the £33.7m collected in the same period last year. As the cost-of-living crisis continues to wreak havoc on people’s wallets, this is money that would be better being with the people who need it most.

How do you know if you have overpaid?

The people affected by the tax overpayment are those who are starting to access their pension, and it is because of an oddity within the PAYE system, according to Jon Greer, head of retirement policy at Quilter.

He added: “This emergency tax situation can be particularly frustrating for people trying to access their funds quickly. It arises due to an oddity within the PAYE system when people start to take money from their pension as they are not taxed using the correct tax code.”

The problem with emergency tax codes is that you will often end up being charged more in tax than you should be, so reclaiming the overpayment is essential. To do this you would need to use form P55 if you have flexibly accessed part of your pension, form P50Z if you have emptied your pension pot, or P53Z if you have received a serious ill-health lump sum or have accessed your pension while you are still working or receiving benefits.

However, you should always check the tax code that is being applied to any income you receive to make sure you are not paying too much tax.

How many people are reclaiming tax?

It seems plenty of people are putting in their tax claims to make sure they are getting the money they are due. For example, just in Q2 2023, HMRC said it has processed 11,232 P55 forms, 2,987 P53Z forms, and 1,620 P50Z forms, suggesting people are accessing their pensions more readily to help cope with the cost-of-living crisis.

Even though inflation has dropped slightly in the last month, wage growth means we could see additional base rate rises implemented by the Bank of England before the end of the year, according to some experts.

Flexible pension access is a way of increasing your income

If you are over 55 and want to access your pension – the minimum age can depend on the scheme rules for your employer or the insurance company that provides your pension plan – then you can begin to make withdrawals.

The first 25% of your pension can be taken tax-free, and this is easy to calculate if you take your pension pot as whole. But if you choose to take your pension out in a flexible way – which means taking a bit at a time – then you will need to pay the relevant amount of tax on that income.

It becomes more complicated if you are still working and have additional income to take into consideration for tax. This is where the tax overpayments are typically happening. One way around this is to work with a tax professional who can help make sure your tax code is correct, and that you are not going to be paying more than you need to the taxman.

This helps to reduce the risk of overpaying your tax in the first place, allowing you to keep the money in your pocket rather than having to wait for the taxman to give it back to you, which can take some time.

Contact us

If you are considering accessing your pension soon, or you have already accessed it but don’t know whether your tax code is correct, then please get in touch and we will check that you are not overpaying tax or that you have any tax rebates due from HMRC.

What employee perks will the taxman help you fund?

We all love a perk of the job, and a major industry has built up around the types of employee perks companies are able to offer. The best news of all is that most of these will be tax deductible, which means the taxman will fund at least part of them.

Everything from free snacks to mental wellbeing support are now a regular part of the employment landscape, among other employee benefits, as companies push to make themselves the best choice for the top employees, especially in specialist sectors where there is a labour shortage.

What perks and benefits should my company offer?

Choosing the right perks to keep your existing employees happy and to attract high-quality new staff is the Holy Grail, and a lot will depend on the industry your business is in, the age group of your workforce and any specific requirements your staff have. One of the best ways to choose the right perks is to canvas your existing employees and ask them, that way you are going to be more likely to give them what they really want and value.

Alternatively, you could ask one of the employee benefit specialist companies to do the work for you, and give you access to the kind of benefits your staff are asking for. There is a cost involved in this, so make sure you are happy to pay the fee and that you will get the benefit of providing the perks.

What are some of the most common benefits?

There are some pretty standard benefits on offer, including private healthcare, dental care and even optician services. But there are some other benefits that may be less usual that could be good for your business. These could include unlimited and unmonitored flexitime, paying a joining bonus for new staff and/or an annual bonus, or negotiating discounts for staff at local pubs, clubs or gyms.

This last suggestion is one you may be able to deal with yourself, especially if your company employees a relatively high number of staff within the local area. There are lots of other businesses that will see the benefit of encouraging your staff to use their services, so it is always worth asking.

We can help you meet your obligations

If you are unsure about what kind of perks your business should offer, then please get in touch with us and we will help you choose the best options and route to delivery for you.

Self-assessment thresholds change for PAYE workers

The threshold for people taxed through PAYE who are required to file a self-assessment return has increased from £100,000 to £150,000. Those affected should be contacted by HMRC if they need to change anything. That said, there have been times in the past where HMRC hasn’t always been spot on with its own paperwork, so you would be wise to keep on top of this yourself if you think this could be an issue for you.

The threshold rises for this tax year, 2023/24, so those filing returns for 2022/23 will still have to file self-assessments if they earn £100,000 or more. If they have income between £100,000 and £150,000 that is taxed through PAYE in their 2022/23 return, HMRC will send a Self-Assessment exit letter. Then those earning above £150,000 through PAYE would need to continue filing self-assessment returns until their position changes. The exception to this would be if those earning below the £150,000 mark meet any of the other criteria which would require them – or would benefit them – to file a self-assessment return.

Why would you still file a return for income below £150k?

If your income is taxed under PAYE for the 2023/24 tax year, and is below £150,000, then you would not need to file a self-assessment return, unless you are also:

• In receipt of any other untaxed income.
• A partner in a business partnership.
• Have a tax liability to the High-Income Child Benefit Charge.
• Or you are a self-employed individual and with gross income of over £1,000.

You can also find out online via Gov.uk if there are any other circumstances under which you would need to send a Self Assessment tax return.

What if I need to reclaim some allowances?

Self-assessment isn’t all about paying tax. If you have some items you need to reclaim tax relief on, then filing a self-assessment return would be the way to do this. There is no reason for you to pay tax unnecessarily, so make ensure you’re claiming any income tax reliefs due.

These could include items you need to buy out of your own pocket to do your PAYE job that are not reimbursed via expenses, such as membership of professional associations, courses that provide continuing professional development, work uniforms that aren’t supplied by your employer, or textbooks you need for your work. You may also need to pay for professional indemnity insurance to cover your work.

Is there anything else I would need to claim for?

If you are a 40% or 45% taxpayer, then any pension contributions you make may only be given tax relief at source of 20% – the basic rate of tax. It will depend on the scheme you are paying into, but many people will need to reclaim the additional 20-25% tax relief due on your pension contributions if your marginal rate of tax is higher than the basic rate.

You can also reclaim additional tax relief on charity contributions, maintenance payments and for any time you have spent working on a ship.

There are various rules to comply with to get maintenance payments relief, but the main one is that you or the person you are paying maintenance payments to must be born before April 6, 1935. So, there are likely to be fewer of these people qualifying as each year passes.

If you think there are any payments you should be able to get tax relief on, then speak to HMRC directly or to your accountant who will help you navigate the self-assessment maze.

We can help you

If you need help to determine whether you should file a self-assessment return to pay additional tax owing or to reclaim tax relief, then please get in touch with us and we can help you understand what you need to do.

Can hybrid working boost your business?

The pandemic brought a lot of changes to our businesses, some good and some bad. One that has continued to be a topic of conversation is the desire for more people to be able to work some, or all, of the time from home.

If your business requires people to be onsite – such as a coffee shop, a factory, or a dental practice, for instance – your staff would have little choice about where they are working. But for administrative roles, or those that could be done from anywhere in the world with a phone, a computer and an internet connection, the argument for getting people to come into the office is a harder one to win.

Employers reluctant to allow workers free rein

Some employers are reluctant to allow their employees to work from home, perhaps because they fear they will get less done there than they would in the office. But various pieces of research show that allowing employees more freedom about where and when they work increases productivity rather than decreasing it.

There are fewer distractions when employees work from home compared to the office, and the ability to work as and when it suits them often results in people being more productive than when they are being forced to work specific hours.

A recent report from the ACCA – UK Talent Trends in Finance 2023 – found that the UK is leading the way when it comes to hybrid and remote working.

Jamie Lyon, head of Skills, Sectors and Technology at ACCA, said: “Only one-fifth of respondents in the UK identified as fully office based, with the remaining 80% either adopting a hybrid approach to work or being fully remote. However, globally, the picture is notably different, with over half of respondents being fully office based. And 77% of respondents in the UK feel they are more productive when working remotely.”

Could hybrid working be good for your employees?

Many companies are already allowing some staff to work from home at least part of the time. But if your business isn’t one of them, you may want to consider adding this as an option.

It can provide various benefits, including:

• Being more inclusive for employees who find it difficult to juggle their home and work life around specific office hours.
• Greater productivity.
• Improved employee wellbeing because they have more control over their working and home life.
• Greater flexibility in allowing employees to change their approach based on what the business needs at a particular time.

However, not every employee is keen to work from home. Some people prefer to be in the office full time as they thrive in this more social environment. So, bear this in mind when you are creating hybrid working policies.

Are there other benefits to your business?

One other major benefit to the business could be the reduced amount of office space needed. If your company owns its office building, you may be able to let out part of that building to another business to benefit from additional income. Alternatively, if you use rented office space such as WeWork, you may be able to reduce the size of the office you need there and cut your monthly outgoings.

You may also consider offering employees a one-off payment to set up their home office to ensure they don’t end up with work-related injuries, such as repetitive strain injury (RSI) from having a poor posture at work because they are using the wrong type of chair or desk and so on. Any saving you can make on office space could be used to offset this payment, and remember it would also be tax deductible.

We can help you

If you are considering hybrid working as part of your business strategy, then please get in touch with us and we can help you understand the benefits and costs that could be involved.

How you can benefit from salary sacrifice

Salary sacrifice is something you may have come across before but not fully understood. After all, why would anyone want to voluntarily give up some of their salary? The reality is that, in some instances, using salary sacrifice to get alternative benefits can reduce your tax bill considerably and make buying the things you would buy anyway much cheaper.

Employers have the ability to arrange large discounts if they know a number of employees will take up a specific benefit, because the provider will be able to sell a larger number in one go if the product or service is being paid for through a company payroll.

What can it be used for?

There are many things employers can offer to their employees through a salary sacrifice scheme. Bicycles, bus passes or other transport payments, gym membership and even car parking or laptops can all be offered via salary sacrifice. People can also make pension payments this way.

The main benefit is that by purchasing goods and services through the payroll, the payment is taken from your salary at source which means you don’t pay tax or National Insurance on the amount of money used to pay for these items. For example, a higher-rate taxpayer would save 40% and 2% NI on the amount of money they sacrifice to make the purchase, while a basic rate taxpayer would save 20% and 12% on NI.

If you are keen to get an electric vehicle, using salary sacrifice can be one of the most cost-effective ways to achieve this. Although this is seen as a ‘benefit in kind’, the value applied to electric cars is just 2%, while for petrol and diesel cars it can be as much as 37%.

As the salary isn’t being ‘paid’ to the employee, employers will be able to reduce their NI contributions too, making it a win-win for all.

We can help you meet your obligations

If you are interested in offering salary sacrifice for your employees, or approaching your employer to see if it will offer you a salary sacrifice scheme, then please discuss this with us and we will advise you on how to do this.

Could you benefit from a free Government midlife MOT?

Our cars go through MOTs each year once they reach a certain age, but have you ever thought of giving yourself an MOT? The Government is offering a free midlife MOT for those in their 40s, 50s and 60s to help them make the right financial decisions for retirement.

The midlife MOT provides free online support to those in the private sector, and can be done face-to-face with Department for Work and Pensions staff in job centres for those looking for work. The aim is to ensure you are giving sufficient thought to your money, work and wellbeing as you head into the later stages of your life.

What’s involved?

The online midlife MOT provides a series of prompts to make you think more carefully about what you may need to do as you get older. For example, will you be able to continue in your current job as you get older? Or will you need to learn new skills to continue to provide for yourself and your family?

You are also prompted to consider whether you have enough money to live on to maintain your current lifestyle? Or whether you might need to examine your pension saving and put some extra aside to enjoy your retirement more comfortably.

The specific questions on the midlife MOT site are:

My work: Am I confident I can continue in my current job, or do I need to protect myself by reskilling? Will caring responsibilities or other priorities mean I need to work more flexibly?

My health: Am I taking the right steps to maintain or improve my health? Would workplace adjustments make it easier for me to stay in my job for longer?

My money: Do I have enough savings to maintain my current lifestyle? I’m confused about pensions, what are my options?

My work and skills: As your situation changes as you get older, you may find that flexible working arrangements can make a difference.

Source: https://www.yourpension.gov.uk/mid-life-mot/

Is this relevant to employers or just individuals?

There is a specific section of the website that highlights what employers can do to help their staff access the midlife MOT for their workplace. There are details on how this could work for both larger companies and smaller employers and you can also download toolkits to use within your business for relevant staff.

There are also a number of useful links within the YourPension.gov.uk/mid-life-mot/ webpage to help people navigate to the relevant information they need to check all aspects of their life are on track as they reach this point in their life.

Let us help you

Do you feel like you need a midlife MOT but would rather talk things through with someone than simply navigate this on your own? If so, then we can help you understand whether you are financially ready for the next chapter of your life. Just contact us and we will guide you through everything you need to know.

Check your PAYE code is correct for this tax year

Every employee working for a company has a Pay-As-You-Earn (PAYE) code which denotes how much tax you will pay in a year. If this code is incorrect, it could mean you are paying more or less tax than you should be, and may need to reclaim that money, or pay more. Neither is a good option, so spending a little time at the start of the tax year checking you have the right code could save a lot of hassle later on.

Why your tax code could be wrong

If you have changed jobs recently, got a pay rise, or gone on maternity leave, you could find your tax code hasn’t kept up with the changes in your life.

Your employer and HMRC are not responsible for ensuring you have the right tax code, and while they do their best to ensure you are paying the right tax, ultimately it is your responsibility to make sure your code is correct. They are computer generated by HMRC, so failing to check could mean you have the wrong tax code for an entire year or more.

The question is, how do you check? Helpfully, you can find out what the different parts of your tax code mean online. There are a few things to look for. For example, most people – with the exception of very high earners who have their personal allowance reduced once they reach annual earnings of £100,000 – can earn £12,570 this year before they need to pay any tax at all.

If you don’t have any benefits in kind from your employer, such as a company car, or a season-ticket loan, then you will most likely have the tax code 1257L. The ‘L’ in this code simply means you are entitled to the normal personal allowance.

However, let’s say you have transferred 10% of your personal allowance to your spouse under the Marriage Allowance transfer. In this case, you will have an ‘M’ at the end of your tax code.

A full list of tax code information and what you should expect to see can be found on the Gov.uk website. If you aren’t sure what your tax code should be, then discuss this with your employer or, if you work for a larger company, you can speak to your HR department.

We can help you meet your obligations

If you are still struggling with your PAYE code and want to be sure you are paying the right amount of tax, then contact us and we will go through this for you to make sure everything is correct.

Should your business declare the cost of the Christmas party?

Christmas parties or even regular summer BBQs, or annual team building events may need to be declared to HMRC for the current 2022/23 tax year if they do not meet certain rules, so you need to be sure you meet all the relevant rules for the exemption.

The key conditions are that the party should be exclusively for business purposes, be open to all employees and cost less than £150 a head to qualify. You can offer more than one regular event to employees over the year, but the combined cost of each must be no more than £150 per person, otherwise the employer may have a National Insurance liability. One-off events do not qualify.

Events costing more than £150 per head across the year

However, if you hold several regular events in a year and the total combined cost of these is more than £150 per person, then you would need to report it as a benefit-in-kind and a tax and National Insurance charge may apply.

For example, if your company has a Christmas party at £100 per head and then a summer party which is £80 per head, these combined breach the £150 limit. So, you would have to choose which you want to be exempt. It makes more sense to exempt the Christmas party which had the higher per head value.

If an event exceeds this £150 limit, then the tax and NI charge applies to the entire amount of the benefit provided, not just the excess. You can include close family members as guests in the party, but the cost of their food, drink, accommodation and so on as part of the party must still not exceed £150, the same as any of the employees.

Events not open to all employees

If there is a specific regular event that is only open to a smaller number of staff, such as directors of the company only, then this would not be exempt under this legislation, and the cost of this would need to be declared to HMRC as a benefit and the relevant tax and NI paid.

Do the same rules apply to virtual functions?

If your staff are in a variety of locations, or primarily work from home, then some employers might have decided to provide a virtual Christmas party. This is fine, and it would in theory work in the same way and with the same caveats as an in-person Christmas party.

You would still not be able to exceed a total cost of £150 for each employee attending, and you would also need to ensure that all staff have been offered access to the party, virtual or otherwise. If this is the case, then you should be able to provide the party without any additional tax or NI liabilities.

The complication here is how to ensure your employees are provided with, say, food and drink for the virtual party without the employer simply giving money to the employee. It could be difficult to prove to HMRC that this money was solely used for the party if an audit was undertaken. So, instead the employer should consider providing the food and drink in a specific way to all employees attending, which would allow the cost to be identified centrally.

This could be done by, for example, sending a food and drink parcel or hamper to every employee in advance of the event to be consumed while everyone is at the online party.

You can find out more about what needs declaring on Gov.uk.

We can help you

If you have concerns about whether your annual Christmas party or summer BBQ needs to be declared to HMRC, then speak to us and we will work with you to ensure you do not fall foul of the rules.

PAYE round-up – what’s new and what you need to know

Dealing with PAYE is one of the main roles of any accounts department, and HMRC has been busy in this area over the past month, meaning there is plenty for businesses to know for the months ahead. One of the most pressing issues is that PAYE Settlement Agreements are due to be completed by October 22 – or October 19 if you want to file and pay by post – and there is a new digital form to help employers meet their obligations.

Employers need to complete this form if they have employees who have “minor, irregular or impracticable” benefits according to HMRC. These could include incentive awards for long-service, telephone bills, non-business expenses for travelling overnight or staff entertainment.

What does this new form do?

The new PAYE Settlement Agreement form (PSA1) has been designed to make it easier for employers to file digitally, which is the preferred method for HMRC. The form provides standardised reporting, improved accuracy, faster processing times which should all result in fewer queries, again according to HMRC.

The new form should create a more streamlined process for employers who need to file returns for employees in this position. For example, in the past a separate paper form would need to be filled in for each employee in a different location. But the new digital form allows you to file a single form for all employees no matter where they are.

Tell HMRC what you need to pay

Using the form means it is also easier for you to tell HMRC what you need to pay. Remember, if you do not do this, then HMRC will do the calculation and you could end up paying more. If you have not got access to the new PSA1 form, then you should contact HMRC as soon as possible and it will tell you what the process is so you can use the new form, which should make filing much simpler.

Don’t be late

It is important to be sure you calculate any money due under the PSA1 and make the payment before the October 22 (or October 19 for paper returns) deadline. If you are late filing, you could face a penalty and pay interest on any amount owed. In the current climate, where energy prices and higher inflation is affecting not just households but also businesses, you should make sure you are not facing any additional charges as a result of poor admin. These are fees that can be completely avoided with the relevant planning.

Pay your PAYE bill through a new variable direct debit plan

Employers can also now take advantage of a new variable direct debit plan which will be available from September 19 onwards. Once it has been set up, you can pay bills including your Full Payment Submission, your Employer Payment Summary, the Construction Industry Scheme, the Apprenticeship Levy, Class 1A National Insurance, and the Earlier Year Update.

Remember to leave yourself enough time for the payments to be taken the first time. You need to leave five working days for the first direct debit to be taken, and then three days for each subsequent direct debit payment. So, get in touch with HMRC as soon as you can if you want to benefit from this plan.

Contact us

If you need any assistance with your PAYE, then contact us and we will give you all the help, support and information you need.

Payroll a pain heading into summer? Here’s what to do

We have all been there. The rising number of employees off over the summer months – especially now the kids have finished school until September – means some departments will be lacking in numbers and some work could get left behind.

One area you cannot afford to let this happen in is the back office, and especially payroll. Employees will forgive a lot of things, but not having their wage hit their accounts at the right time is not one of them. Not only would it mean many people missing mortgage or rent payments for that month, it would also create a mistrust between employees and management. Once trust is lost, it is not easy to get back.

Ensuring you have enough staff to cover all areas is difficult during these months, and with sick leave and particularly Covid continuing to be an issue with staff needing to take time off, you really need a back-up plan.

Emergency cover

While you may never need to use it, you should ensure you have some emergency cover in place just in case you are facing a crisis at short notice. You can do this by training staff to do a different job within the office so they can step in if needed, or you can speak to your accountant and find out if they could give you the assistance you need for the short term if things went wrong.

Never underestimate the importance of admin staff

There is no getting away from the fact that your back-office and admin staff are key to running your business efficiently. Without them, all sorts of problems would arise that could create some costly errors for the company as a whole.

So, make sure they have all the back-up they need as you come into a period where many staff are off on their holidays and the workload becomes a bigger burden for those left behind.

We can help you meet your obligations

If you think you may have difficulties covering all of your admin and back-office roles over the summer, then please get in touch and we can help to suggest solutions for you.

Are you claiming everything you are entitled to from the taxman?

Tax is something that is a certainty in life, as former US President Benjamin Franklin said, but there are lots of ways you can reduce the amount of tax you have to pay by claiming for expenses you may not realise you could.

Those of us who are self-employed or own businesses are more likely to claim the majority of costs and expenses against tax that we can. But what many PAYE employees do not realise is that they can also claim certain expenses if they are not covered by their employer, and they are specifically relevant to their work.

What can be claimed?

For example, let’s say you are a nurse, an engineer, a psychologist or simply an employee who happens to use their car for work purposes sometimes. In each of these cases, there are likely to be things that you are paying for that you could claim if your employer is not repaying you for them.

It could be fees you pay to be a part of a professional institution, or professional indemnity insurance, or uniforms that you need to buy yourself, shoes, books you need to study for your work, toys that you may need to use to encourage children to talk to you in the case of a child psychologist, for instance. The list would include anything and everything that you need to buy yourself that solely relates to your work.

While many of these may be relatively small amounts individually, they will soon add up, and if you consider how much they add up to over a long period of time, there is every reason to reclaim that money.

How do you claim them?

Understandably, many people are nervous about dealing with the taxman because they think automatically that it is going to end up costing them money. But that is not always the case. Reclaiming these amounts that are legitimate allowances could put a significant amount of money back into your pocket.

To claim these, you would need to do a self-assessment form. This is something many people who pay tax through PAYE would not be familiar with. You can speak to your accountant for more information if you need it, or you can ask HMRC directly about how you claim for these costs on your self-assessment.

Don’t be nervous, and go back as many years as you can

You do not need to be nervous when dealing with the tax office as you are not doing anything wrong. This is money you are owed, and you would be doing yourself a disservice by not getting this money back into your own pocket.

If you have not been claiming this money back before, then you can go back up to four previous tax years. This means you can reclaim overpaid tax from 2018/19 if you make the claim before April 5, 2023. If you had an average of £1,000 that you could have reclaimed for each of these years, then you would get a £4,000 rebate from the taxman by making the claim.

In the current economic climate, even relatively small amounts that you can reclaim will make a difference. But remember, you must have proof of the purchases you made. Usually these would need to be receipts, but if you do not have these, then you can prove any payments made using bank statements if you need to. If you bought anything online, you may have records there in your email or, say, an Amazon account.

We can help you

If you are unsure about whether you can claim some of the expenses for your work or want to know you have claimed everything that it is possible to claim, then please get in touch with us and we will help you through the process.

Change in National Insurance contribution levels in July

A change in National Insurance contribution (NICs) levels comes into force at the beginning of July, which should save around 30m people £330 each, according to the Government.

From July 6, the amount you can earn before you start paying NICs will increase, which means the amount of overall tax – since NICs is a tax in all but name – will reduce.

What are the new thresholds?

From July 6, the threshold for Class 1 NICs, which are paid by those who are employed, and Class 4 NICs, which are paid by the self-employed, rises from £9,880 to £12,570. This means you can earn an additional £2,690 before you need to start paying NICs.

The new NICs threshold is now in line with the starting point for income tax, but the NICs rate you will pay has not changed and still includes the 1.25% addition for the Health and Social Care Levy made earlier this year. So, everything you earn between £12,570 and £50,270 will be charged NICs at 13.25%. Anything above this higher threshold will be charged at 3.25%.

Part of a £15 billion package of assistance

The additional savings we will see in our pockets thanks to this change will help considerably with the cost-of-living crisis. In fact, along with the council tax rebate that has been announced, energy bills assistance worth at least £400 and support for the most vulnerable households of at least £1,200, this should go some way to easing the problems associated with the current high inflation.

Inflation reached 9.1% in May according to figures from the ONS, up from 9% in April and 7% in March. The current rate is the highest level of inflation since 1982.

BoE base rate rises to 1.25%

The Bank of England increased the base rate to 1.25% in June, taking rates to the highest level in 13 years. While this is good news for savers who are likely to see more interest being paid on their accounts, it is potentially bad news for some people with mortgages. If you are on a fixed rate mortgage that is still within the fixed-rate term, then you will not see any change in your mortgage payments. But you may find it is more expensive to borrow when you come to change your mortgage in future.

If you are on a tracker rate, then you will automatically see the interest rate you are paying rise, which could be a considerable cost depending on how much you have borrowed.

How much will you save?

However, if you want to find out how much more money you will have in your pocket thanks to the change in the NICs thresholds, the Government has created a handy calculator that you can use to determine what you will save on the Gov.uk website. But if you are self-employed, this calculator will not work for you, so you are best to contact your accountant to find out what the change means for you.

Contact us

If you are an employer, employee or self-employed, and want to know more about how the NICs changes affect you and what you can expect to pay, then contact us and we will give you the information you need.

Spring Statement round-up

The Chancellor’s Spring Statement on March 23 was limited on giveaways, but there were some measures designed to help people struggling with the highest rates of inflation in 30 years.

The Office for Budget Responsibility (OBR) has forecast that inflation will average 7.4% this year, and there are many people who are already struggling with everything from filling their cars with fuel to keeping the heating on.

Fuel Duty cut but NI increase

One cut came in the form of a 5p a litre reduction in the price of fuel thanks to a fall in fuel duty to help offset the spiralling cost of oil.

Yet despite many experts imploring the Chancellor to postpone the 1.25% hike in National Insurance for 2022/23 – the Health and Social Care Levy – Rishi Sunak refused to do this. The one change he made was raising the NI threshold by £3,000 rather than the planned £300, to bring it in line with the £12,570 personal allowance. He described this as a “£6 billion personal tax cut for 30 million people”.

Employment Allowance increase for small businesses

The Employment Allowance will increase to £5,000 for small business, which is a tax cut of £1,000 for around 500,000 firms which starts in April.

Businesses can also expect to benefit from tax cuts on business investment during the Autumn Budget, and there will be an increase in business research and development tax credits to boost productivity.

Income tax cut in 2024

The basic rate of income tax will fall from 20% to 19% from April 2024, the first cut in this tax in 16 years according to the Chancellor. But he refrained from bringing this cut in for the coming tax year as there is too much uncertainty in the economy.

We can help you

Even if you or your business did not see anything in the Spring Statement to help you, there are likely to be ways you can benefit from existing tax efficiencies to maximise your money. Get in touch with us to find out how.

SSP changes

To help employers affected by the spread of the Omicron variant of COVID-19, the Statutory Sick Pay (SSP) rebate scheme for small employers is being reintroduced. In addition, the period for which an employee can self-certify a sickness absence is increased temporarily from seven days to 28 days.

SSP rebate scheme

The SSP rebate scheme for small employers allowed employers who had fewer than 250 employees on their payroll on 28 February 2020 to reclaim up to two weeks’ SSP per employee in respect of Coronavirus absences. Normally, employers must meet the cost of any SSP paid to an employee in full. The original scheme applied in respect of Coronavirus absences prior to 30 September 2021, with a deadline for making rebate claims of 31 December 2021.

To help employers affected by staff absences as a result of the surge in COVID-19 cases following the emergence of the Omicron variant, the SSP rebate scheme for small employers is being resurrected. You will be able to use the scheme if you are based in the UK and you had a PAYE scheme with fewer than 250 employees as of 30 November 2021. As previously, you will be able to claim back the cost of up to two weeks’ SSP paid to an employee for Coronavirus-related absences. The claim period is being reset; consequently, a claim can be made in respect of SSP paid to an employee, regardless of whether a claim was made under the original scheme. Claims under the resurrected scheme can be made retrospectively from mid-January 2022.

Self-certification

The period for which an employee is able to self-certify an absence for SSP purposes has been increased temporarily from seven days to 28 days. This means that rather than needing a Fit Note from a GP for absences of more than seven days, employees will only need a Fit Note once they have been absent for 28 days. This will reduce the pressure on GPs.

Regulations have been introduced to give statutory effect to the relaxation, which applies for periods of sickness which begin on or after 17 December 2021 and end on or before 26 January 2022. Thereafter, the self-certification period will revert to seven days.  

Speak to us

To find out more about how to make a claim under the SSP rebate scheme, or to learn more about the temporary self-certification rules, please speak to us.

Seasonal gifts to employees

Christmas is a time of giving, and you may wish to give your employees a small token of your appreciation for their work during the year. To prevent the gift being accompanied by an unwanted tax liability, you can take advantage of the trivial benefits exemption to keep the gift tax-free.

Scope of the exemption

Where you provide an employee with a low-cost benefit, the employee is not taxed on the provision of that benefit as long as the following conditions are met:

• the benefit is not cash or a cash voucher;
• the cost of the benefit is not more than £50;
• the benefit is not made available to the employee under a salary sacrifice arrangement or under a contractual obligation; and
• the benefit is not provided in recognition of particular services being performed, or in anticipation of them being performed.

Benefits that meet these conditions are known as trivial benefits.

Where the conditions are met, if the recipient is a director of a close company, the total value of tax-free trivial benefits that they can enjoy in the tax year is capped at £300. Otherwise, there is no limit on the number of trivial benefits which can be given to an employee tax-free each year.

Application of the exemption to Christmas gifts

The trivial benefits exemption can be used to ensure that gifts typically given to employees at Christmas, such as chocolates, wine, a turkey or a hamper, can be given tax-free. The key is to keep the cost below £50.

It will normally be straightforward to work out the cost of an item, but where it is difficult to determine the individual cost, the average cost can be used instead.

Lavish gifts

The trivial benefits exemption only applies if you give modest gifts costing £50 or less; lavish gifts will fall outside the exemption. The £50 limit is not a tax-free allowance, and if the cost of the gift is more than £50, the full amount will be taxable, not just the excess over £50. For example, if you give your employees a Christmas hamper costing £200, the taxable amount is £200, not £150 (the excess over £50).

If you do wish to give your employees an expensive Christmas gift, you may wish to pay the associated tax on their behalf by including it within a PAYE Settlement Agreement.

The gift card trap

To enable employees to choose their own gift, you may prefer to give a gift card or access to an app which lets them choose a treat. However, it is necessary to tread carefully here. If an employee uses an app or is given a gift card which may be topped up, the cost of the benefit is the total cost in the tax year, not the cost each time the app or gift card is used. This may mean that while each individual item purchased from the app or gift card costs less than £50, if the annual cost is more than £50, the benefit will not be a trivial benefit, and the exemption will not be available.

Speak to us

To check whether your Christmas gifts fall within the scope of the exemption, please get in touch.