Massey Accounting Company

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Coronavirus (COVID-19): What financial support is available for UK businesses?

Coronavirus (COVID-19): What financial support is available for small UK businesses?

Following is what we know so far. Clients will be updated as soon as possible on specific rules regarding eligibility and how to make claims once that info is available.

Coronavirus Job Retention Scheme

All UK employers will be given support in paying 80% of employees salaries up to £2,500 per month (for at least 3 months from 1 March 2020) for those employees that would otherwise have been laid off during, and only due to, the Coronavirus crisis.

How to claim – HMRC are working urgently to set-up a system but for now we know that you need to designate employees are “furloughed workers”, notify your employees and submit those details to HMRC (method of submission yet to be announced).

VAT payments

VAT payments falling due between 20 March – 30 June 2020 simply do not need to be made on time. This applies to all businesses but it’s deferment only. Any deferred payments will need to be caught-up by 31 March 2021 if not earlier. In the meantime VAT Returns must still be submitted on time. VAT Refunds will be processed as normal.

UPDATED INFO: HMRC ask that businesses please cancel their direct debits with their bank with the intention of setting these back-up again when you cash-flow allows you to make payments.

Self-Assessment payments for the Self-Employed

The usual payment on account due by 31 July 2020 does not need to be paid until 31 January 2021. This deferment will not attract penalties or interest. No application to defer is needed.

UPDATED INFO: Deferral of the July payment on account now applies to all taxpayers under Self-Assessment. There is no need to contact HMRC to arrange this.

HMRC will fund Statutory Sick Pay (SSP) for employees absent due to Coronavirus

Until now employers themselves have funded the £95.85 per week SSP paid to employees during sickness absence. However, starting 13 March 2020 HMRC will fund employers up to two weeks SSP per eligible employee (including directors of small limited companies) who is absent because of COVID-19 (infected, self-isolating etc). During the crisis SSP is payable from day 1 of absence rather than the usual day 4. Eligible employees are those earning at least £120 per week. The HMRC mechanism for repayment is being designed and yet to be announced.

Self-employed not eligible for SSP

The Self-Employed will qualify for Employment Support Allowance of around £73 per week from day 1 of COVID-19 related sickness (extended from the usual day 8). If already claiming Universal Credit then claims are to be made via that system.

Business Rates

Automatic business rates holiday for retail, hospitality and leisure industry for 2020/21. Local Authority will write to confirm – no action needed.

Automatic cash grants for retail, hospitality and leisure industry trading from business properties of up to £25,000 or £10,000 for properties with a rateable value under £15,000 (including those paying no business rates because of Small Business Rate Relief). Local Authorities are writing to affected businesses. No action or application is needed.

UPDATED INFO: The list of businesses to qualify for the grants is expanding. Of note, Estate Agents and Childcare Nurseries recently added.

Coronavirus Bounce Back Loan

The scheme helps small and medium-sized businesses to borrow up to 25% of their turnover, capped at £50,000.

The government guarantees 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. Details here.

Insurance

Unfortunately, most businesses are not specifically not insured for closure due to pandemics or government-ordered shut-downs. But, check your policy – if you are then insurers are reportedly dealing fairly with such claims.

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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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National Minimum Wage rise from April 2020

National Minimum Wages rates

National Living Wage (NLW) rates (for those over 25 years old) and National Minimum Wage (NMW) rates (for those under 25 years old) will rise from 1 April 2020.

The NLW increase of 51p represents a 6% rise, equivalent to an annual increase of around £930 for a full-time worker.

In summary and effective 1 April 2020 the follow minimum wage rates will apply

Year 25 and over 21 to 24 18 to 20 Under 18 Apprentice *
April 2019 £8.21 £7.70 £6.15 £4.35 £3.90
April 2020 (new rates) £8.72 £8.20 £6.45 £4.55 £4.15

* The apprentice rate is for apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to the National Minimum Wage for their age.

Plan ahead

Ensure your payroll procedures are up to date and consider notifying staff ahead of time in writing (even via a note on their payslip). This transparency is likely to be well received and could help build positive employee relations. It also offers an opportunity to explain that any overtime worked during a pay reference period prior to the introduction of the new rates, that is payable after these have been introduced, will still be paid at the previous rate.  For further details and more rates visit gov.uk

Pension contribution rates

If you employ staff and run a pension scheme the minimum contributions rates remain the same with no more planned increases:

  • Employer minimum pension contribution 3%, staff contribution 5%.

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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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National Minimum Wage & Pensions rise from April 2019

From 1 April 2019 the minimum hourly pay rates along with the minimum contributions for auto-enrolment pensions will increase affecting both employees and employers.

First let’s look at the National Minimum Wages rates:

National Living Wage (NLW) rates (for those over 25 years old) and National Minimum Wage (NMW) rates (for those under 25 years old) will rise from 1 April 2019.

The NLW increase of 38p represents a 4.8% rise, equivalent to an annual increase of about £700 for a full-time worker.

In summary and effective 1 April 2019 the follow minimum wage rates will apply

Year 25 and over 21 to 24 18 to 20 Under 18 Apprentice *
April 2018 £7.83 £7.38 £5.90 £4.20 £3.70
April 2019 (new rates) £8.21 £7.70 £6.15 £4.35 £3.90

* The apprentice rate is for apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to the National Minimum Wage for their age.

The Government has previously said it plans to raise the national living wage to at least £9 per hour by 2020.

Ensure your payroll procedures are up to date. For further details and more rates visit gov.uk

 

Pension contribution rates increase from April 2019

If you employ staff and run a pension scheme the minimum contributions rates are increasing from April 2019. This has long been the intention of The Pension Regulator (TPR) and is the last increase of “phasing”. The increases are as follows:

  • Employer minimum pension contribution 3% (from 2%), staff contribution 5% (from 3%).

If we provide your payroll services then we will of course implement the increased rates on your behalf but because this represents an increased cost for both employer and employee we highly recommend that you let your staff know in advance of this change. To do so you may like to use this TPR letter template.

Source info and more detail: http://www.thepensionsregulator.gov.uk/en/employers/phasing-increase-of-automatic-enrolment-contribution

 

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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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National Minimum Wage Rise from April 2018

National Living Wage (NLW) rates (for those over 25 years old) and National Minimum Wage (NMW) rates (for those under 25 years old) are to rise from 1 April 2018.

The NLW increase of 33p represents a 4.4% rise, equivalent to an annual increase of about £600 for a full-time worker.

In summary and effective 1 April 2018 the follow minimum wage rates will apply

Year 25 and over 21 to 24 18 to 20 Under 18 Apprentice *
April 2017 £7.50 £7.05 £5.60 £4.05 £3.50
April 2018 (new rates) £7.83 £7.38 £5.90 £4.20 £3.70

* The apprentice rate is for apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to the National Minimum Wage for their age.

The Government has previously said it plans to raise the national living wage to £9 per hour by 2020.

Ensure your payroll procedures are up to date. For further details and more rates visit gov.uk

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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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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Pension contribution rates increase from April 2018

If you employ staff and run a pension scheme the minimum contributions rates are increasing from April 2018 as set-out in the table below. This has long been the intention of The Pension Regulator (TPR) and is known as phasing.

 

 

Date Employer minimum contribution Staff contribution Total minimum contribution
Until 5 April 2018 1% 1% 2%
6 April 2018 to 5 April 2019 2% 3% 5%
6 April 2019 onwards 3% 5% 8%

If we provide your payroll services then we will of course implement the increased rates on your behalf but because this represents an increased cost for both employer and employee we highly recommend that you let your staff know in advance of this change. To do so you may like to use this TPR letter template.

Source info: http://www.thepensionsregulator.gov.uk/en/employers/phasing-increase-of-automatic-enrolment-contribution

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National Minimum & Living Wage Rise from April 2017

National Living Wage (NLW) rates (for those over 25 years old) and National Minimum Wage (NMW) rates (for those under 25 years old) are to rise starting 1 April 2017.

The eagle-eyed among you may notice that those on the National Minimum Wage (NMW) are enjoying their second increase in a year (the last being 1 October 2016).

In summary, and effective 1 April 2017 the follow minimum wage rates will apply

  • Workers aged 25 and over – £7.50 per hour (up from £7.20 from 1 Apr 2016)
  • Workers aged 21 – 24 years old £7.05 per hour (up from £6.95 from 1 Oct 2016)
  • Workers aged 18 – 20 years old £5.60 per hour (up from £5.55 from 1 Oct 2016)
  • Workers under 18 years old £4.05 per hour (up from £4.00 from 1 Oct 2016)
  • Apprentice rate £3.50 per hour (up from £3.40 from 1 Oct 2016)*

* The apprentice rate is for apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to the National Minimum Wage for their age.

Employers may be relieved to know that future rises are now planned for just once a year in April.

Ensure your payroll procedures are up to date. For further details and more rates visit gov.uk

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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National Minimum Wage Rise from 1 October 2016

Ok, so this is getting confusing. The National Minimum Wage (NMW) now runs alongside the National Living Wage (NLW).

The National Minimum Wage (NMW) rates rise from 1 October 2016 whereas we don’t expect an increase in the National Living Wage until April 2017.

In summary, and effective 1 October 2016 the follow minimum wage rates will apply

  • Workers aged 25 and over – £7.20 per hour (as has been the case since 1 April 2016)
  • Workers aged 21 – 24 years old £6.95 per hour (up from £6.70)
  • Workers aged 18 – 20 years old £5.55 per hour (up from £5.30)
  • Workers 16 – 17 years old £4.00 per hour (up from £3.87)
  • Apprentice rate £3.40 per hour (up from £3.30)*

* The apprentice rate is for apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to the National Minimum Wage for their age.

Ensure your payroll procedures are up to date. For further details and more rates visit gov.uk

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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A tax free gift, is it true?!

A tax free gift, is it true?!

In general, an employer will report gifts made to employees on their annual Benefit-in-Kind Return form P11D meaning that both the employer and employee will pay income tax and national insurance on the value of the gift.

However since 6th April 2016 employers are now, sensibly, able to give tax free gifts to employees up to the value of £50 without the cost or complication of reporting a Benefit-in-Kind.

Such gifts now have a statutory exemption under the Trivial Benefits-in-Kind rule, which must meet each of the following four conditions to qualify for the exemption:

  • the cost of providing the benefit does not exceed £50 (or the average cost per employee if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person)
  • the benefit is not cash or a cash voucher
  • the employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements)
  • the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services)

Practical points

  • This is a useful statutory exemption allowing employers to provide most gifts without needless complication.
  • To be treated as a trivial benefit in kind the gift must cost under £50. If your gift costs £51 then the whole amount will be taxed on the employer and employee as a benefit in kind.
  • The gift must be freely given and not as a reward for employee performance (examples include birthday gifts, Christmas presents, a gift on the birth of a new baby, the cost of a summer garden party).
  • Whilst cash or cash vouchers cannot be given, store / gift vouchers may be given.
  • There is no change to the amount of tax relief the business will receive on the cost of the gift. For example a garden party may still count as entertaining which is not allowed for corporation tax.

Source info: https://www.gov.uk/government/publications/tax-exemption-for-trivial-benefits-in-kind-draft-guidance/tax-exemption-for-trivial-benefits-in-kind-draft-guidance

Related topics

Entertaining and Meals Out – What is the correct tax treatment?

Are gifts to customers allowable against tax?

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What happens if you don’t comply with Automatic Enrolment?

What happens if you don’t comply with Automatic Enrolment or you miss your staging date?

The Pension Regulator will initially focus on educating employers who miss their staging date deadline however persistent and deliberate non-compliance can lead to penalties of between £50 – £10,000 per day. Ultimately criminal prosecution can ensue. For more information please visit The Pension Regulator.

For those who get around to meeting their duties only after their staging date has passed then the consequences include, at a minimum, additional admin and professional fees, and you will be required to back-date any missed contributions (in some cases you may also need to pay the late employees contributions on their behalf).

Massey Accounting Company is starting its communication with each of its employers between 6 – 12 months before their staging date. If you need any help or just a have a question, please don’t hesitate to let us know.

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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.


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Payroll clients beware!

Starting 6 March 2015 HMRC will issue penalties for late payroll submissions.

This means that payroll data needs processing and submitting to HMRC on or before the date your employees are paid.

Penalties are charged for more than one late submission in the tax year as follows: 1-9 Employees – £100 per month; 10-49 Employees – £200 per month.

Whist this is strict I don’t think we’ve had one late filing this year. However, the real trap may be when it comes to leavers:

Leavers (and their P45) should be processed and notified to HMRC on or before the day they leave or on the day of their last payment. Failure to report on time will trigger a late filing penalty.

Please keep this in mind and keep us informed as soon as you know when an employee is starting and leaving.

Source material: https://www.gov.uk/what-happens-if-you-dont-report-payroll-information-on-time

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