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COVID-19 £1,000 Job Retention Bonus

Coronavirus (COVID-19) Job Retention Bonus – will you qualify?

During the Chancellor’s 8 July “Plan for Jobs” speech to Parliament Mr Sunak confirmed that the Job Retention Scheme will end 31 October. However in an attempt to avoid mass lay-offs he also announced a bonus of £1,000 for employers that retain previously furloughed staff through to at least 31 January 2021.

Details of the Job Retention Bonus are here but I’ll outline the takeaways below: https://www.gov.uk/government/publications/job-retention-bonus/job-retention-bonus

Job Retention Bonus Guidance – In Summary

1. The Job Retention Bonus is a one-off payment to employers of £1,000 for every employee who they previously claimed for under the scheme, and who remains continuously employed through to 31 January 2021.

2. Eligible employees must earn at least £520 a month on average between the 1 November 2020 and 31 January 2021.

3. Employers will be able to claim the Job Retention Bonus after they have filed PAYE for January and payments will be made to employers from February 2021.

4. Employers can claim the Job Retention Bonus for all employees who meet the above criteria, including office holders, company directors and agency workers

5. Claims can be made from February 2021 and the income received under this scheme will be taxable income for the business.

Common Employers Questions:

  1. Do previously furloughed directors qualify for the bonus? A: Yes.
  2. My employee’s furlough finished sometime before 31 October but they’ll continue to be employeed well after January 2021 – will I still qualify for the bonus for that employee? A: Yes.
  3. Is there any action to take now? A: Simply continue to maintain up to date payroll records and RTI submissions with HMRC. Then, as long as your retained (but previously furloughed) employees earn over £520 per month between November 2020 – January 2021 there should be no problem in qualifying for this bonus.

My previous COVID-19 posts can be found here:

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COVID-19 Job Retention Scheme – new rules from 1 July

Coronavirus (COVID-19) Job Retention Scheme – new rules from 1 July

On Friday evening the Chancellor announced three changes to the Job Retention Scheme as well as an extension to the Self-Employed Income Support Scheme (the self-employed can skip ahead to that section).

The changes are outlined here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Detailed guidance on the new rules is expected to be published 12 June.

Job Retention Scheme – new rules starting 1 July

1. From 1 July 2020, the scheme will be made more flexible to enable employers to bring previously furloughed employees back part time and still receive a grant for the time when they are not working.

2. From 1 August 2020, employers will have to start contributing to the wage costs of paying their furloughed staff and this employer contribution will gradually increase in September (govt will fund 70%) and October (govt will fund 60%).

3. The scheme will close to new entrants from 30 June.

Employers: What to do now?

The final date by which an employer can furlough an employee for the first time will be 10 June (in order to complete the minimum 3 week furlough by 30 June).

As some employers have been rotating their furloughed workers then they should consider now if any workers that haven’t yet been furloughed can be furloughed before 10 June in order to leave the door open to the flexible furloughing (part-time) rules starting 1 July.

Extension to the Self-Employed Income Support Scheme (SEISS)

The Chancellor also announced plans to extend the Self-Employment Income Support Scheme (SEISS) for those people whose trade is adversely affected by COVID-19 (coronavirus). Eligible self-employed people will be able to claim a second and final SEISS grant in August; this will be a taxable grant worth 70% of their average monthly trading profits for three months, paid out in a single instalment and capped at £6,570 in total.

If you make a claim for the second grant you will have to confirm your business has been adversely affected on or after 14 July 2020 (PER GOV.UK 12 JUNE UPDATE). People do not need to have claimed the first grant to claim the second.

Self-Employed: What to do now?

Claims for the first SEISS grant, which opened on 13 May, must be made no later than 13 July. Eligible self-employed people must make a claim before that date to receive the first SEISS grant (a taxable grant of 80% of their average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £7,500 in total).

My previous COVID-19 posts can be found here:

Enjoy saving tax? 

We have two videos to help on our YouTube-logo-full_color channel; and for regular tax-tips follow our blog on  or click +Follow at the bottom of this page.


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COVID-19 Job Retention Scheme: Advice for Company Directors

Coronavirus (COVID-19) Job Retention Scheme – Advice for Company Directors

The critera to qualify for the COVID-19 Job Retention Scheme (essentially funding 80% of salaries), is without doubt, stricter and less generous in the case of small company directors. Below I’ll discuss what can be claimed by this group of employees. The full guidance is the same as that for the non-director employees and is found here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Job Retention Scheme: How it applies to company directors

  • Directors can be furloughed if they’re an employee on PAYE and on the payroll on 28 February 2020
  • The same restrictions to furloughing apply both to directors and employees. See here for the full list but of particular difficulty for directors is the requirement to perform no work whilst furloughed.
  • In practice, a company may be so badly affected by the crisis that it goes into a ‘COVID-19 hibernation’ meaning that the director would have no day to day employment type duties (especially, income generating activity) but is still on hand to undertake their statutory duties as company director.
  • Other companies might only be partially affected. In such cases, it might be practical to furlough all but one of the directors. This may especially apply to small husband and wife ran companies.

How much is the grant worth to directors?

  • Employers can choose to pay a furlough salary of 80-100% but the government is funding only up to 80% (capped at £2,500). In the case of directors it’s likely that the company will want to continue to pay 100% of the current salary in the knowledge that 80% will be funded by HMRC later.
  • Directors salaries are usually set quite low with the remainder of their remuneration being paid via dividends. Unfortunately HMRC will not be funding anything towards dividends.
  • Presuming therefore that you earn a typical directors salary (often below all tax and NI deductions) of £719 per month. HMRC will fund approx £575 per month.
  • The grant will be received by the company as taxable income and cannot be expected to hit the company before late-June 2020 or later.

Practical tips

  • There’s no need to worry or rush to take action. If work has ground to a halt you will qualify for this scheme. Just apply the rules are best as you can formalise the arrangement later using our template letter to furlough.
  • As for claiming the grant – please don’t contact HMRC. They’re of course extremely busy and are in the process of contacting employers.

My previous COVID-19 posts remain relevant and are:

Enjoy saving tax? 

We have two videos to help on our YouTube-logo-full_color channel; and for regular tax-tips follow our blog on  or click +Follow at the bottom of this page.


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Optimum Directors’ Salary and Dividends for 2020/21

What is the optimum directors’ salary and dividend mix for 2020/21?

Small companies will usually pay their directors with a mix of salary and dividends. The level of the directors’ salary is usually set in order to avoid any income tax and national insurance. On this basis the recommended remuneration package for the forthcoming tax year is:

Upper limits (if intention is to fully utilise the basic rate tax band)


2020/21


2019/20

Directors’ salary – per annum

£8,788

£8,632

Dividends – per annum

£41,212

£41,368

It should be noted that dividends exceeding both the personal allowance and the dividend allowance of £2,000 will be taxed via the directors’ personal income tax return at 7.5%. Meaning that if dividends are paid all the way up to the basic rate band of £50,000 (same as last year) there will be a personal tax bill of £2,663 (last year £2,663)

Companies with more than just a single director on the payroll may benefit from the Employment Allowance which reduces the company’s Class 1 National Insurance contributions (Employer’s N.I.) by up to £4,000.

In such cases there may be an opportunity for directors to eke out a little more tax savings by paying themselves a salary of £12,500 and dividends up to a maximum of £37,500 (the overall tax saving between the director and the company being around £260).

This second option will not be the best fit for everyone. More than ever, personal circumstances must be carefully considered to give the best results.

Each client of ours will be receiving a personalised recommendation shortly.

Enjoy saving tax?

We have two videos to help on our YouTube-logo-full_color channel; and for regular tax-tips follow our blog on  or click +Follow at the bottom of this page.


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Beware of the mobile phone tax trap

 

It’s a well-known tax free benefit – an employer may provide one mobile phone per employee for both business and personal use without triggering a taxable Benefit-in-Kind (Section 319 ITEPA 2003).

Sounds simple enough but there are conditions:

• The mobile phone / sim-card must remain the property of the employer
• One phone per employee
• The contract must be between the employer and the mobile phone provider

It’s this final condition that often catches out micro companies that blissfully pay for the director’s mobile phone bill whilst the contract remains in the director’s personal name.

Whilst a seemingly minor technicality the tax treatment of reimbursement of mobile phone costs in this way triggers a costly Benefit-in-Kind Income Tax and National Insurance charge.

It has been reported that HMRC are taking a strict line on this matter, and when discovered, ordering assessments of often 4 years underpaid taxes averaging £500 before penalties and interest.

What’s the solution?

If your mobile contract isn’t in the company name – don’t overly worry – you’re not alone by a long stretch. To keep things practical (and in the real world) we suggest the following:

  • First of all, call your mobile provider to ask about their procedure for transferring the contract to the company (personally I found this surprisingly straight forward)
  • If there are extra charges to make the change during your contract, then wait until you’re out of your contract and try again – this is usually the easiest time to transfer your contract and you’re usually offered the same price as personal rate tariffs

Essentially, in our experience, it’s easier and cheaper than most people realise to review your mobile contracts yourself before HMRC do!

Source info: https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim21779

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Optimum Directors’ Salary and Dividends for 2019/20

What is the optimum directors’ salary and dividend mix for 2019/20?

Small companies will usually pay their directors with a mix of salary and dividends. The level of the directors’ salary is usually set in order to avoid any income tax and national insurance. On this basis the recommended remuneration package for the forthcoming tax year is:

 

Upper limits (if intention is to fully utilise the basic rate tax band)


2019/20


2018/19

Directors’ salary – per annum

£8,632

£8,424

Dividends – per annum

£41,368

£37,926

It should be noted that dividends exceeding both the personal allowance and the dividend allowance of £2,000 will be taxed via the directors’ personal income tax return at 7.5%. Meaning that if dividends are paid all the way up to the basic rate band of £50,000 (2018/19 was £46,350) there will be a personal tax bill of £2,952 (last year £2,438)

Companies with more than just a single director on the payroll may benefit from the Employment Allowance which reduces the company’s Class 1 National Insurance contributions (Employer’s N.I.) by up to £3,000.

In such cases there may be an opportunity for directors to eke out a little more tax savings by paying themselves a salary of £12,500 and dividends up to a maximum of £37,500 (the overall tax saving between the director and the company being around £270).

This second option will not be the best fit for everyone. More than ever, personal circumstances must be carefully considered to give the best results.

Each client of ours will be receiving a personalised recommendation shortly.

Enjoy saving tax?

We have two videos to help on our YouTube-logo-full_color channel; and for regular tax-tips follow our blog on 
or click +Follow at the bottom of this page.


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Optimum Directors’ Salary and Dividends for 2018/19

What is the optimum directors’ salary and dividend mix for 2018/19? Or click here if you’re looking for our more recent 2019/20 recommendation.

Small companies will usually pay their directors with a mix of salary and dividends. The level of the directors’ salary is usually set in order to avoid any income tax and national insurance. On this basis the recommended remuneration package for the forthcoming tax year is:

 

Upper limits (if intention is to fully utilise the basic rate tax band)

2018/19

2017/18

Directors’ salary – per annum

£8,424

£8,164

Dividends – per annum

£37,926

£36,836

 

It should be noted that dividends exceeding both the personal allowance and the dividend allowance of £2,000 (previously £5,000) will be taxed via the directors’ personal income tax return at 7.5%. Meaning that if dividends are paid all the way up to the basic rate band of £46,350 (2017/18 was £45,000) there will be a personal tax bill of £2,438 (last year £2,138)

For those companies that have more than just a single director on their payroll then they will continue to benefit from the Employment Allowance which reduces the company’s Class 1 National Insurance contributions (Employer’s N.I.) by up to £3,000.

In such cases there may be an opportunity for directors to eke out a little more tax savings by paying themselves a salary of £11,850 and dividends up to a maximum of £34,500 (the overall tax saving between the director and the company being around £240).

This second option will not be the best fit for everyone. More than ever, personal circumstances must be carefully considered to give the best results.

Each client of Massey Accounting Company will be receiving a personalised recommendation shortly.

Enjoy saving tax?

We have two videos to help on ourYouTube-logo-full_colorchannel; and for regular tax-tips follow our blog on Google+ or click +Follow at the bottom of this page.


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Optimal Directors’ Salary and Dividend Mix for 2017-18

Probably the most important post of the year for limited company directors!

Question: What’s the most tax efficient salary and dividend mix for the 2017/18 tax year?

An owner managed limited company will usually pay their directors / shareholders with a mix of salary and dividends.

The level of the director’s salary is usually set in order to avoid any income tax and national insurance. On this basis the recommended remuneration package for 2017/18 is:

Upper limits for 2017/18

Salary – per annum: £8,164 (last year £8,060)
Salary – per month: £680 (last year £671)

Dividend – per annum: £36,836 (last year £34,940)
Dividend – per month: £3,069 (last year £2,911)

It should be noted that since the introduction of the dividend ordinary tax rate of 7.5% on dividends over £5,000 there will be a personal tax bill of £2,138 (last year £2,025) if dividends are paid all the way up to the basic rate limit of £45,000 (last year £43,000).

For those companies that also have non-director employees on the payroll then they will continue to benefit from the Employment Allowance which reduces the company’s Class 1 National Insurance contributions (Employer’s N.I.) by up to £3,000.

In such cases there may be an opportunity for directors to eke out a little more tax savings by paying themselves a salary of £11,500 and dividends up to a maximum of £33,500 (the overall tax saving between the director and the company being around £234).

This second option will not be the best fit for everyone. More that ever, personal circumstances must be carefully considered to give the best results.

Each client of Massey Accounting Company will be receiving a personalised recommendation shortly.


Enjoy saving tax?

We have two videos to help on ourYouTube-logo-full_colorchannel; and for regular tax-tips follow our blog on Google+ or click +Follow at the bottom of this page.


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Optimal Directors’ Salary for 2016-17

Probably the most important post of the year for limited company directors!

If you’re looking for the 2017/18 optimal directors’ salary, check out this year’s post here. Otherwise for our 2016/17 article read on.

An owner managed limited company will usually pay their directors’ / shareholders’ with a small salary + dividends.

The level of the director’s salary is usually set in order to avoid any income tax and national insurance. On this basis the recommended remuneration package for 2016-17 is:

Upper limits for 2016-17

Salary – per annum: £8,040 (last year £8,040)
Salary – per month: £670 (last year £670)

Dividend – per annum: £34,960 (last year £30,891)
Dividend – per month: £2,913 (last year £2,574)

It should be noted that with the introduction of the dividend ordinary tax rate of 7.5% there will be a personal tax bill of £2,025 if dividends are paid all the way up to the maximum basic rate limit of £34,960 (yes, that’s a personal tax bill of up to £2,025 compared to £nil last year!).

For those companies that also have non-director employees on the payroll then they will continue to benefit from the Employment Allowance which reduces the company’s Class 1 National Insurance contributions (Employers N.I.) by up to £3,000 (last year £2,000).

In such cases there may be an opportunity for directors to eke out a little more tax savings by paying themselves a salary of £11,000 and slightly lower dividends of £32,000 (the overall tax saving between the director and the company being around £237 (last year £203)).

This second option will not be the best fit for everyone. This year, more that ever, personal circumstances must be carefully considered to give the best results.

Each client of Massey Accounting Company will be receiving a personalised recommendation shortly.


Enjoy saving tax?

We have two videos to help on ourYouTube-logo-full_colorchannel; and for regular tax-tips follow our blog on Google+ or click +Follow at the bottom of this page.