Reminder of not-so-trivial tax-free benefits

There is a benefit-in-kind (BiK) trivial exemption that applies to small non-cash benefits like a bottle of wine, or a bouquet of flowers given occasionally to employees or any other BiK classed as 'trivial' that falls within the exemption. By taking advantage of the exemption employers can simplify the treatment of BiKs whilst at the same time offering a tax efficient way to give small gifts to employees.

The trivial benefit rules provide a great opportunity to give small rewards and incentives to employees as long as the gifts are not provided as a reward for services performed or as part of the employees’ duties. However, gifts to employees on milestone events such as the birth of a child or a marriage or other gestures of goodwill would usually qualify.

The employer also benefits as the trivial benefits do not have to be included on PAYE settlement agreements or disclosed on P11D forms. There is also a matching exemption from Class 1A National Insurance contributions.

The tax exemption applies to trivial BiKs where the BiK:

  • is not cash or a cash-voucher; and
  • costs £50 or less; and
  • is not provided as part of a salary sacrifice or other contractual arrangement; and
  • is not provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.

The rules also allow directors or other office-holders of close companies and their families to benefit from these gifts but with an annual cap of £300. The £50 limit remains for each gift subject to the £300 of non-cash benefits to be withdrawn per person per year. The £300 cap does not apply to employees. If the £50 limit is exceeded for any gift, the value of the benefit will be taxable.

Source:HM Revenue & Customs | 06-11-2023

Tax free annual party

The cost of a staff party or other annual entertainment is generally allowed as a deduction for tax purposes. If you meet the various criteria outlined below, then there is no requirement to report anything to HMRC or pay tax and National Insurance. There will also be no taxable benefit charged to employees.

  1. An annual Christmas party or other annual event offered to staff generally is not taxable on those attending provided that the average cost per head of the function does not exceed £150.
  2. The event must be open to all employees. If a business has multiple locations, then a party open to all staff at one of the locations is allowable. They can also have separate parties for separate departments, but employees must be able to attend one of the events.
  3. There can be more than one annual event. If the total cost of these parties is under £150 per head, then there is no chargeable benefit. However, if the total cost per head goes over £150 then whichever functions best utilise the £150 are exempt and the others taxable. Note, the £150 is not an allowance and any costs over £150 per head are taxable on the full cost per head.
  4. It is not necessary to keep a running total by employee but a cost per head per function. All costs including VAT must be considered. This includes the costs of transport to and from the event, food and drink and any accommodation provided.

It is highly recommended when planning a staff party or other annual event to try and stick to the tax rules above. This should ensure that your party does not have an extra tax cost for you or your employees.

Source:HM Revenue & Customs | 23-10-2023

Electric charging of company vehicles at home base

HMRC has published revised guidance concerning the charging of company cars and vans at residential properties. HMRC had previously maintained that the reimbursement of costs in relation to charging a company car or van at a residential property was a taxable benefit. This advice seemed at odds with the exemption on payments and benefits provided in connection with company cars and vans laid out in the relevant legislation.

HMRC has now confirmed, following a review of their position, that the electric charging of company vehicles at home base can now be treated as a tax-free benefit.

HMRC has published revised guidance about this change in interpretation and has stated that:

Following a review of our position, HMRC now accepts reimbursing part of a domestic energy bill, which is used to charge a company car or van, will fall within the exemption provided by section 239 ITEPA 2003.

This means that no separate charge to tax under the benefits code will arise where an employer reimburses the employee for the cost of electricity to charge their company car or van at home. 

HMRC has also said that the exemption will only apply where it can be demonstrated that the electricity was used to charge the company car or van.  Employers will need to make sure that any reimbursement made towards the cost of electricity relates solely to the charging of their company car or van.

Source:HM Revenue & Customs| 16-10-2023

Tax on incentive rewards

Companies may use incentive award schemes to encourage their employees in various ways. For example, to sell more of their own goods and services. The award can be in forms including cash, vouchers or other gifts.

Where an employer meets the tax payable on a non-cash incentive award given to a direct employee, by entering into a PAYE settlement agreement (PSA), the award is not chargeable to tax on the employee.

With the exception of non-cash awards covered by a PSA, the incentive awards made to employees are chargeable as employment income. The value of these awards is calculated as follows:

Cash
The value to use is the total amount of cash awarded.

Vouchers
If the award consists of vouchers, then the value to use is the full cost to the provider of making the award.

Other gifts
If the award is something other than vouchers, then the charge is usually the full cost to the provider of making the award. There are certain exceptions for the low paid.

There are also concessions which HMRC makes to enable you to say thank you to staff including encouragement awards, suggestion schemes and to reward long service.

Source:HM Revenue & Customs| 18-09-2023

Calculate tax on company cars

Where an employee with a company car is provided with fuel for their own private use by their employers, the default position is that the employee is required to pay the car fuel benefit charge. The charge is determined by reference to the CO2 rating of the car applied to a fixed amount, currently £27,800. For example, a CO2 rating of 150g/km would create a taxable benefit of £9,730.

The car fuel benefit charge is not applicable when the employee pays for all their private fuel, this includes commuting to and from work. Employees should keep a log of private mileage and can then use the published advisory fuel rates to repay the cost of fuel used for private travel to their employer. In this case, HMRC will accept that there is no car fuel benefit charge, and the employee will save the Income Tax charge on the private car fuel. It will usually be much cheaper to repay your employer for private fuel rather than to pay the Income Tax charge especially if private mileage is relatively low.

The advisory fuel rates are intended to reflect actual average fuel costs and are updated quarterly. However, the use of the advisory fuel rates is not binding if the employer can demonstrate that employees cover the full cost of private fuel by repaying at a lower rate per mile. There is also a lower advisory rate if the company car is fully electric.

Source:HM Revenue & Customs| 11-09-2023

Tax on trivial benefits

There is a benefit-in-kind (BiK) trivial exemption that applies to small non-cash benefits like a bottle of wine, or a bouquet of flowers given occasionally to employees, or any other BiK classed as 'trivial' that falls within the exemption. By taking advantage of the exemption employers can simplify the treatment of BiKs whilst at the same time offering a tax efficient way to give small gifts to employees.

The trivial benefit rules provide a great opportunity to provide small rewards as an incentive to employees. The main caveat being that the gifts are not provided as a reward for services performed or as part of the employees’ duties. However, gifts to employees on milestone events such as the birth of a child or a marriage or other gestures of goodwill would usually qualify.

The employer also benefits as the trivial benefits do not have to be included on PAYE settlement agreements or disclosed on P11D forms. There is also a matching exemption from Class 1A National Insurance contributions.

The tax exemption applies to trivial BiKs where the BiK:

  • is not cash or a cash-voucher; and
  • costs £50 or less; and
  • is not provided as part of a salary sacrifice or other contractual arrangement; and
  • is not provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.

The rules also allow directors or other office-holders of close companies and their families to benefit from this relief but with an annual cap of £300. The £50 limit remains for each gift but could allow for up to £300 of non-cash benefits to be withdrawn per person per year. The £300 cap does not apply to employees. If the £50 limit is exceeded for any gift, the value of the benefit will be taxable.

Source:HM Revenue & Customs| 04-09-2023

On your bike tax-free

The Cycle to Work scheme was introduced over 20 years ago to help promote the use of environmentally friendly modes of transport.

The scheme allows employers to provide bicycles and cyclists’ safety equipment to employees as a tax-free benefit. The scheme must be offered to all employees and the bike must be used mainly for qualifying journeys, i.e., between home and work. However, pleasure use of the bike is also allowed. Where the scheme conditions are satisfied employees can benefit from a significant tax and National Insurance Contributions (NICs) reduction. In addition, there is no employer liability to NICs.

The cycle to work benefits only relate to the loan period, however, it is commonplace for an employer or a third party bicycle provider to offer the employee the bicycle / equipment they have been using for sale after the loan period has ended. The bike may be offered to the employee for sale at a fair market value, but this must be done as a separate agreement.

Employers of all sizes across the public, private and voluntary sectors are eligible to take part in the scheme to provide (technically loan) bicycles and cyclists’ safety equipment to employees as a tax-free benefit. The scheme can also be used for electronic bikes known as e-bikes.

Source:HM Revenue & Customs| 21-08-2023
Save as you Earn SAYE employee share schemes and the benefits for employers; london accountant

Guide to the Save As You Earn (SAYE) employee share scheme

Saving money and investing in the stock market can be a great way to grow your wealth, but it can be difficult to know where to start. Fortunately, there are several tax-advantaged employee share schemes available in the UK that can help you invest in your employer’s company while reducing your tax bill. Examples include the Share Incentive Plan or the Save As You Earn (SAYE) share scheme, which is a popular way for both employers and employees to save money and invest in the success of the business.


Save as you earn; employee share scheme; share incentive plan; london accountant

What is an employee share scheme?

Before we dive into the specifics of the SAYE scheme, it’s important to understand what tax-advantaged employee share schemes are and how they work. In the UK, there are several different types of employee share schemes, including:

  • Share Incentive Plans (SIPs).
  • Enterprise Management Incentives (EMIs).
  • Company Share Option Plans (CSOPs).
  • Save As You Earn (SAYE) schemes.

These schemes are designed to encourage employees to buy shares in their employer’s company, which can be a great way to align their financial interests with the success of the company. In addition, these schemes often come with income tax advantages for employees when compared to direct income, which can make them a more attractive investment option.

 

What is the Save As You Earn scheme?

The Save As You Earn (SAYE) scheme is a type of employee share scheme that allows employees to save money over a period of time and use those savings to purchase shares in their employer’s company at a later date. You can save up to £500 under a SAYE scheme. Under the SAYE scheme, employees agree to save a fixed amount of money each month for a period of three or five years.

At the end of the savings period, the employee can use the money they have saved to purchase shares in their employer’s company at a discounted price. The discount is determined at the start of the scheme and can be up to 20% of the share price at the beginning of the scheme.

Save As You Earn BENEFITS for employees

There are several benefits to participating in a SAYE scheme as an employee. Firstly, the scheme allows employees to save money in a tax-efficient way, as the savings are deducted from their pre-tax salary. This means that employees can reduce their tax bill while also building up savings for the future.

SAYE also comes with specific extra tax advantages:

  • The interest and any bonus at the end of the scheme is tax-free.
  • You do not pay Income Tax or National Insurance on the difference between what you pay for the shares and what they’re worth.

You might have to pay Capital Gains Tax if you sell the shares. However, you will not pay Capital Gains Tax if you transfer the shares:

  • To an Individual Savings Account (ISA) within 90 days of the scheme ending.
  • To a pension directly from the scheme when it ends.

In this way, the SAYE scheme allows employees to invest in their employer’s company at a discounted price, which can be a great way to reward the effort they put into their work. If the company’s share price increases over the savings period, employees can potentially make a profit by purchasing shares at a lower price than they are currently trading at.

As a final point, the SAYE scheme is a flexible and low-risk way to invest in the stock market. If the employee decides not to purchase shares at the end of the savings period, they can simply withdraw their savings without penalty.

 

SAVE AS YOU EARN BENEFITS for employeRS AND BUSINESSES

The SAYE scheme can also be beneficial for employers. Firstly, it can be a great way to incentivise employees and align their interests with the success of the company. Employees who are shareholders are often more engaged and motivated, which can lead to increased productivity and profitability.

In addition, the SAYE scheme can be a cost-effective way for employers to offer a valuable employee benefit. Unlike some other share schemes, the SAYE scheme does not require the employer to give shares to employees for free, which can be expensive and dilute the ownership of the company.

 

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How do you set up a SAYE scheme as an employer / business?

Setting up a SAYE scheme as an employer or business owner is a relatively straightforward process, but it does require some planning and preparation. Here are the steps you will need to take to set up a SAYE scheme for your employees:

  1. Choose a savings provider:
    The first step in setting up a SAYE scheme is to choose a savings provider who will administer the scheme on your behalf. There are several providers to choose from, so it’s important to do your research and choose one that meets your needs.
  2. Determine the details of the scheme:
    Once you have chosen a savings provider, you will need to determine the details of the SAYE scheme, including the savings period, the amount that employees will save each month, and the discount that employees will receive when purchasing shares.
  3. Obtain regulatory approval:
    Before launching the scheme, you will need to obtain regulatory approval from HM Revenue & Customs (HMRC). This will involve submitting an application and providing details of the scheme.
  4. Communicate the scheme to employees:
    Once the SAYE scheme has been approved, it’s important to communicate the details of the scheme to your employees. This should include information on how the scheme works, how much employees will save each month, and the potential benefits of participating in the scheme.
  5. Launch the scheme:
    Finally, you can launch the SAYE scheme and start accepting employee contributions. You will need to provide regular updates to employees on the performance of the scheme and any changes to the discount or savings period.

GET PROFESSIONAL ASSISTANCE

Overall, setting up a SAYE scheme can be a valuable way to incentivize and engage your employees, while also offering a tax-efficient way for them to save and invest in your company. With careful planning and preparation, you can launch a successful SAYE scheme that benefits both your employees and your business.


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Tax exempt private medical costs

There is no requirement for employers to pay tax and National Insurance on certain health benefits covered by tax concessions or exemptions. For example, there is no requirement to report employees’ medical or dental treatment or insurance if they are a part of a salary sacrifice arrangement. 

In addition, the following health benefits can be provided tax free:

  • A maximum of one health-screening assessment and one medical check-up in any year.
  • Eye tests required by health and safety legislation for employees who use a computer monitor or other type of screen.
  • Glasses or contact lenses required by employees for working on computer monitors or other types of screen.
  • Medical treatment for employees working overseas. The employer must have committed in advance to pay for this treatment or must pay the provider directly for the employee’s treatment or insurance.
  • Medical treatment or insurance related to injuries or diseases that result from your employee’s work.
  • Medical treatment to help an employee return to work. This allows the employer to pay up to £500 in costs for an employee to return to work.
  • Any medical or dental treatment or insurance provided that is not exempt must be reported to HMRC. Employers may be required to deduct and pay tax and National Insurance on these amounts.
Source:HM Revenue & Customs| 11-06-2023
share scheme deadlines; london accountant

UK Share Scheme Filing Deadlines and Tax Advantages

UK Share Scheme Filing Deadlines and Tax Advantages

In this blog post, we’re going to delve into the world of UK share schemes, those exciting yet often perplexing plans that can offer some serious tax advantages to employees. We’ll unpack the four approved share schemes – Share Incentive Plans (SIPs), Save As You Earn (SAYE) schemes, Company Share Option Plans (CSOPs), and Enterprise Management Incentive (EMI) schemes. Most importantly, we’ll discuss their annual filing deadlines, with a focus on the tax year 2022-23.

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What are the approved share schemes?

Firstly, what are these approved share schemes? Let’s break them down:

  1. Share Incentive Plans (SIPs): SIPs allow employees to acquire shares in their employing company. The shares are usually held in a special trust and can offer significant tax and National Insurance contribution benefits if the shares are held in the plan for a certain period.

  2. Save As You Earn (SAYE) schemes: SAYE schemes, also known as Sharesave, allow employees to save between £5 and £500 per month over a set period (3, 5, or 7 years). At the end of the saving period, employees have the option to use their savings to buy shares in their company at a discount, or take the cash. You can read our full post on SAYE here.

  3. Company Share Option Plans (CSOPs): CSOPs offer employees the opportunity to acquire shares at a fixed price. The real advantage comes if the company’s share price rises above that fixed price, as the difference is not subject to Income Tax or National Insurance.

  4. Enterprise Management Incentive (EMI) schemes: EMI schemes are particularly suited for small, higher-risk companies. They offer selected employees the chance to acquire shares in the company. The tax advantages can be significant, especially if the company grows in value.

deadlines and penalties for share scheme filing

Now that we’ve defined these schemes, let’s talk about the important annual filing deadlines. For the tax year 2022-23, the deadline for submitting the online employment-related securities annual return is 6 July 2023. Failure to meet this deadline will result in an automatic late filing penalty of £100. Further penalties apply if the return remains outstanding after 6 October 2023 (£300) and 6 January 2024 (£300).

Even if a share scheme operator has received and paid the initial penalty, they must still submit an end-of-year or nil return to meet their filing obligations. Employers that don’t submit annual returns on-time run the risk that they and /or their employees may lose any tax advantages from the scheme.

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What is a P11D?

A P11D form is a form used by employers to list certain ‘benefits in kind’ provided to directors or employees. P11D forms are used to provide information to HMRC on all Benefits in Kind (BiKs), including those under the Optional Remuneration Arrangements (OpRAs) unless the employer has registered to payroll benefits. This is known as payrolling and removes the requirement to complete a P11D for the selected benefits. The P11D form is submitted annually to HMRC.

The deadline for submitting the 2022-23 form is 6 July 2023. The form can be submitted using commercial software or via HMRC’s PAYE online service. Paper P11D and P11D(b) forms are no longer accepted by HMRC. Employees must also be provided with a copy of the information relating to them on these forms by the same date.

A P11D(b) is still required for Class 1A National Insurance payments regardless of whether the benefits are being reported via P11D or payrolled. The deadline for paying Class 1A NICs is 22 July 2023 (or 19 July if paying by cheque).

Where no benefits were provided from 6 April 2022 to 5 April 2023 and a form P11D(b) or P11D(b) reminder is received, employers can either submit a 'nil' return or notify HMRC online that no return is required. Employers should ensure that they complete their P11D accurately, including all the details of cars and loans provided. There are penalties of £100 per 50 employees for each month or part month a P11D(b) is late. There are also penalties and interest for late payments.

Any tax or National Insurance due for 2022-23 under a PAYE Settlement Agreement (PSA) needs to be paid electronically to clear into HMRC’s bank account by 22 October 2023 (19 October 2023 for payments by cheque). This does not need to be reported on a P11D.

Source:HM Revenue & Customs| 08-05-2023
entertaining a client; london accountant; entertainments for clients

Entertaining a client: Don’t forget your tax and reporting

As a business owner in the UK, it’s crucial to understand the tax, National Insurance, and reporting obligations associated with providing entertainment for clients through your employees. Whether it’s wining and dining a client or hosting social events, certain rules govern the financial aspects of these activities. In this article, we’ll explain what constitutes entertaining a client, differentiate between business and non-business entertainment, and outline how they can impact your tax, National Insurance, and reporting obligations.


What Qualifies as entertaining a client?

Entertainment includes various activities such as dining, drinking, and hospitality provided to clients. When your employees engage in such activities on behalf of your business, it becomes necessary to consider the tax and National Insurance implications and fulfil reporting requirements.

 

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Entertaining a client for business purposes

Business entertainment refers to instances where you entertain clients with the specific purpose of discussing a business project or establishing and nurturing business connections. The rules for business entertainment remain the same regardless of whether you directly arrange and pay for the entertainment, pay a supplier for entertainment arranged by your employee, or reimburse your employee’s entertainment expenses.

In all cases, you must report the cost of business entertainment on form P11D. However, you are not required to deduct or pay any tax or National Insurance on these expenses.

 

Non-Business Entertainment for clients

Non-business entertainment involves entertaining clients for social reasons or maintaining business acquaintances outside of specific projects. The tax, National Insurance, and reporting obligations for non-business entertainment differ based on who arranges and pays for the entertainment.

 

Entertainment for clients Arranged and Paid by Your Business

If your business arranges and pays for non-business entertainment, you must report the cost on form P11D and pay Class 1A National Insurance based on the value of the benefit provided.

 

entertaining a client; entertainment for clients; london accountant

Entertainment for clients Arranged by the Employee and Paid by Your Business

When your employee arranges non-business entertainment, and your business covers the expenses, you must report the cost on form P11D. Additionally, you need to add the full cost to the employee’s earnings and deduct Class 1 National Insurance (but not PAYE tax) through payroll.

 

Entertainment for clients Arranged and Paid by the Employee, with Reimbursement by Your Business

In the case where your employee arranges and pays for non-business entertainment, and your business reimburses the employee, the reimbursement amount is considered earnings. Consequently, you should add it to the employee’s other earnings and deduct PAYE tax and Class 1 National Insurance through payroll.

 

Completing form P11D

When completing form P11D, an entertainment-related tick-box helps HMRC determine whether your employee can claim a tax deduction for the entertainment expenses provided by your business. If you are completing the form for a charity or a tonnage tax company, you don’t need to enter anything in the box.

For other businesses, tick the box if the cost of the entertainment will be disallowed in your business’s tax calculations. Conversely, put a cross in the box if the cost won’t be disallowed.

 

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explaining returnerships and employer apprentice incentives; london accountant

Returnership incentives for over-50s

Are you over 50 and looking for a new career opportunity? A returnership may be right for you – a newly announced initiative from the UK government designed to help older workers get back into work.

Read on to find out exactly what a returnership is and how businesses can benefit through employer apprenticeship incentives.

What is a returnership?

‘Returnerships’ is a new initiative launched by the UK government to encourage adults over the age of 50 to get back into work and embark on new career ventures. The scheme brings together three programmes – Apprenticeships, Skills Bootcamps, and Sector-Based Work Academy Programmes (SWAPs) – to provide a clear route back into work and encourage employers to hire older workers.

Skills Bootcamps are free courses designed in partnership with local employers to help fill job vacancies in your area. These flexible courses last up to 16 weeks and allow you to gain the in-demand skills employers are looking for, with the offer of a job interview on completion. From courses in digital and green industries, to those in technical sectors such as construction or engineering, there are hundreds of bootcamps on offer.

An apprenticeship is a job with training that can be used by learners of all ages and all career stages to gain valuable skills, retrain or reskill. Lastly, Sector-based work academy programmes (SWAPs) are an opportunity to learn new skills and get experience of working in a particular industry, for example care, construction or warehouse work.

Who is a returnership for?

Returnerships are targeted at adults over the age of 50 who are returning to work or seeking a career change. Apprenticeships and most Skills Bootcamps are open to everyone, but SWAPs are specifically for jobseekers who are claiming either Universal Credit, Jobseeker’s Allowance (JSA) or Employment and Support Allowance (ESA).

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What has the UK government announced about returnerships?

The UK government has announced additional funding of £63.2 million to increase the availability of Skills Bootcamps and SWAPs. This includes £34 million of additional funding for Skills Bootcamps, helping up to 8,000 more people to benefit from this transformational scheme, with an aim of delivering 64,000 training places from next year.

The increased funding will also allow the expansion of the Sector-Based Work Academy Programme (SWAPs) scheme to increase the number of places available and make the programme more accessible. This will create around 40,000 new SWAPs placements.

To further build on the adult learning offer, the government has also recently announced the Lifelong Learning Entitlement. From 2025, people will be able to access loans worth up to £37,000 to upskill or retrain no matter where they are in life.

Returnership UK

How do I get started with a returnership?

Your first port of call should be HMRC’s Returnership Toolkit. The comprehensive documents covers both the specifics of getting into returnships schemes like SWAPs and Skills Bootcamps, as well as the general advice about updating your CV and finding a career direction.

What are the employer apprentice incentives?

For employers, HMRC will fund between 95% and 100% of training costs for apprentices you hire. They also report that in the UK, the estimated yearly gain for employers is between £2,500 and £18,000 per apprentice during their training period.

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What is a Share Incentive Plan?

Share Incentive Plans (SIPs) were first introduced in July 2000 to give employees tax and NICs savings when they buy or are given shares in the company they work for.

Provided all the qualifying conditions are met, shares which are obtained under a SIP are not liable to Income Tax or NICs at the time they are acquired and there is no CGT for accrued gains whilst the shares are held in a SIP. This includes holding the shares in a SIP for 5-years.

There are four different ways that shares can be obtained in a SIP:

  • An employer can give employees awards of free shares (which can be performance related e.g., based on the performance of individuals, teams, divisions or work units) up to a maximum of £3,600 p.a. tax-free.
  • Employees can buy shares valued at up to £1,800 per year out of their pre-tax salary. This is subject to this being no more than 10% of an employee’s annual salary.
  • Employers can give up to two free shares for each share an employee buys.
  • Dividends from any of the free, partnership or matching shares can be reinvested tax free in the purchase of further shares (if allowed by the employer).
Source:HM Treasury| 27-02-2023
State and Private Pensions UK

Guide to UK Pensions: Workplace & Private

Let’s talk pensions. Everybody needs to make a plan for when they eventually retire. Nobody wants to work forever, and that means making sure you have enough money to live off of after saying goodbye to your 9 – 5 job. The most common way to save for retirement is through pensions.

Pensions are schemes which you pay a certain amount into regularly and which will pay money out to you once you reach retirement age. Pensions don’t simply hold onto this money to pay it back to you later. They will invest this money in some way so that you end up receiving more money in the end than you’ve paid in over the years.

There are many types of pensions in the UK, but the most important divide is that of the state pension vs. private pensions.

State Pension Summary

As the name suggests, the state pension is provided by the UK government. The previous state pension scheme is called the Basic State Pension. In 2016, this scheme was replaced by the New State Pension. Those who reached pension age before 2016 will continue to be paid the Basic State Pension.

The New State Pension rules therefore apply to men born on or after 6 April 1951, and women born on or after 6 April 1953.

How do I check if I have a state pension?

To get information about your State Pension, contact the Pension Service if you’re in the UK or the International Pension Centre if you live abroad.

Eligibility for the New State Pension is based on how many years you have paid National Insurance Contributions (NICs). Usually, NICs are taken off your salary automatically by your employer if you earn at least £242 a week from one employer. Employers are also required to pay a portion of NICs for each employee.

If you’re not working, you can still receive ‘National Insurance credits’ in certain cases. This applies if you are getting Jobseeker’s Allowance, Employment and Support Allowance, Carer’s Allowance, or claim Child Benefit for a child under 12.

The number of years you’ve paid NICs or received credits as above, are called your Qualifying Years. You usually need at least 10 Qualifying Years to claim any state pension.

What is the state pension amount in the UK?

The full New State Pension payout is £185.15 per week. However, this is the maximum amount. You will only receive this full payout if you have a total of 35 Qualifying Years, as explained above.

Of course, the New State Pension only came into effect in 2016. This means that most people began accumulating Qualifying Years while the Basic State Pension scheme was still in place.

Qualifying Years from before 2016 will be considered using the new rules except when you would have gotten a higher amount under the old scheme. If this is the case, Qualifying Years from before 2016 will be worth this higher amount. This won’t often be the case as the old full Basic State Pension was £141.85 per week.

All Qualifying Years from after 2016 will be considered using the New State Pension rules.

How do I calculate my state pension amount?

In most cases, you will need at least 10 Qualifying Years (QYs) to qualify for any state pension. The maximum QYs you can have is 35, which will net you the full £185.15 per week.

 

Each QY is worth the same amount, so we can work out that each year would add about £5.29 a week to your payouts. You can get a pension amount estimate by dividing 185.5 by 35, and multiplying by your number of Qualifying Years.

 

This means someone with 17 QYs would receive £89,8 per week (£5.29 x 17 QY).

 

This also means that the New State Pension minimum is £52.9 (£5.29 x 10 QY).


You can get a state pension estimate by using the State Pension Forecast tool.

UK State Pension 2023 Infographic

Does the state pension amount increase?

The new State Pension increases each year by whichever is the highest:

  • Earnings – the average percentage growth in wages (in Great Britain)
  • Prices – the percentage growth in prices in the UK as measured by the Consumer Prices Index (CPI)
  • 2.5%

What if I was contracted out of state pension contributions?

You will have a deduction from your state pension amount because you were ‘contracted out’ before April 2016. This means that you paid lower National Insurance Contributions because you were also paying into some kind of private pension scheme. This is more likely if you worked in the public sector

You can check if you were contracted out by looking at old payslips. If your National Insurance Contributions line has the letter D or N next to it, you were contracted out. If it has the letter A, you have not been contracted out.

What is the state pension age?

The state pension age is currently 66. However, this is increasing over time, and so it may in fact be higher by the time you reach pension age. Between May 2026 and March 2028, the state pension age will gradually increase to 67.

To find out exactly what your state pension age will be when you get there, use the government’s state pension age calculator.

Private pensions

Aside from state pensions, you can also take part in private pension schemes, which are not run by the government. These are split into personal pensions, which you yourself must organise, and workplace pensions, which are organised by employers.

You can claim from both the state pension, and any other pensions you have contributed to. Private pensions will have different ages at which you can start claiming payments. This is usually at least 55.

Workplace pension providers

All employers are required to provide a workplace pension scheme for workers who:

  • Are aged between 22 and state pension age
  • Earn at least £10,000 per year

 

This is referred to as ‘automatic enrolment’. Contributions for these pensions are taken off your salary, but your employer is required to also pay into the scheme themselves.

A common provider is the NEST pension for workplace schemes. The National Employment Savings Trust was set up after workplace pensions became mandatory, and any employer can use it as their pension provider.

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Personal pension contributions

You can also make payments into a personal pension scheme that you sign up to yourself. These can be ‘stakeholder pensions’, which must meet specific government requirements such as charge limits. These could also be self-invested personal pensions (SIPPs), which give you greater control over the investments you make.

You can make either regular or lump sum payments to pension providers.

What are the different types of private pension schemes?

Pensions come in two types – ‘defined benefit’ and ‘defined contribution’.

 

Defined benefit schemes take the money you pay into them and put them into investments. These investments could include things like shares, property, or other financial assets. The total value of your pension will go up or down depending on how these investments perform.

 

Defined benefit schemes pay out a set amount, and are not dependent on the amount you paid in or on investments. These are often used as workplace pensions, and based on your salary and how long you’ve worked for your employer.

The State Pension scheme acts as a combination of these two types. The amount you receive in the end is based on how much you have paid in, but that money is not invested. Your payouts will only change based on your number of Qualifying Years.

Are pensions taxable?

You will pay Income Tax as usual if your total income is above the Personal Allowance of £12,570. This could include:

  • Your state pension
  • Private pensions (both workplace and personal)
  • Employment earnings
  • Income from investments

But, you can also take up to 25% of the amount in any pension as a tax-free lump sum. This tax-free one-time deposit does not affect your personal allowance. Keep in mind that despite this tax-free 25%, taking large sums from your pension could push you into a higher tax bracket.

How does pension tax relief work for contributions?

You do not pay tax on your pension contributions unless they:

  • Total more than 100% of your earnings in a year
  • Exceed the annual allowance of £40,000
  • Exceed the lifetime allowance of £1,073,100

You will receive pension tax relief up to these amounts automatically if:

  • Your employer takes workplace pension contributions out of your pay before deducting Income Tax
  • Your rate of Income Tax is 20%. Your pension provider will claim it as tax relief and add it to your pension pot.

If you pay Income Tax above 20%, you will have to claim extra pension tax relief on your Self Assessment tax return.

You will also pay tax on your contributions if your pension provider:

  • is not registered for tax relief with HM Revenue and Customs (HMRC)
  • does not invest your pension pot according to HMRC’s rules

Need Assistance from an Accountant?

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guide to compliance obligations for UK companies

Your guide to UK Compliance Obligations

Companies need to follow rules set out by many different government bodies, written in various legislative documents. When setting up and running a limited company, you have to keep in mind all of the following:

  • Complying with applicable industry regulations set out by professional regulators – for example, the Financial Conduct Authority, the Office of Rail and Road, the Law Society or the Environment Agency
  • Complying with finance regulations – such as tax, payroll, HMRC, accounting, record keeping, Companies House and anti-money laundering regulations
  • Employment law and workers’ rights
  • Health and safety for workers and visitors to your offices/site
  • General Data Protection Regulation (GDPR) 
  • Contracts and agreements with third parties
  • Sector-specific permits, licences, permissions

It’s an expansive list! Our accountants at CIGMA Accounting are CIMA-registered Management Accountants. They specialise in working with businesses to form companies, create strategies, and making sure you’re on the right side of financial regulation.

CIGMA Accounting helps businesses around the UK grow while navigating the red tape. You can contact us here for a free quote.

Limited company obligations

This article is going to focus on the Companies Act 2006, which is the main piece of law setting out rules and expectations for limited companies. The Act outlines what are called ‘compliance obligations’ for companies. These are actions which companies are obliged to do in order to comply with the rules.

company records

1. Registered office

Companies must provide an office address which is able to receive letters and documents. This address must be in the country where the company was registered. You are legally required to display the address on all communications with clients, and your website.

2. Confirmation statement

Companies must file a Corporation Tax Return to HMRC, even if the company has no tax to pay. This must include details about:

  • Capital allowances claimed for business asset purchases
  • Gains on assets sold
  • Directors’ loans that are unpaid
  • Reliefs to be claimed
  • Any losses carried forward

Businesses with a trade volume over £85,000 must also register with HMRC for VAT.

Your final tax obligation is Pay As You Earn (PAYE). The PAYE system collects taxes from employees at the source. You as the employer are responsible for running this system. This involves deducting income tax and National Insurance Contributions.

3. Directors

Aside from financial records, companies are also expected to keep up to date details about their addresses, directors, and shareholders. Incorporated businesses must supply the following information to Companies House:

This is an annual report which must record your:

  • Office address
  • Business activity
  • Details of directors
  • Ownership and division of shares

4. Event Driven Reporting

Companies must inform Companies House of changes such as:

  • Change of directors, shareholders, or their personal details
  • Change of office address
  • Sales of shares
  • Change of company name or constitution


This is in addition to the three statutory registers which businesses must keep.

Companies must appoint at least one individual as a director. Directors are legally responsible for running the company and ensuring reports are made. The director of a UK company does not have to be a UK resident and can live anywhere in the world. Directors must supply their personal information, including an address, which will be publically available.

financial statements

A company’s annual accounts are prepared at the end of a financial year. These accounts must include:

  • A balance sheet of what the company owns, owes, and is owed by others
  • An account of sales, running costs, and profit / loss made over the year
  • A director’s report

This account needs to be sent to all shareholders, HMRC, Companies House, and anyone who attends the company’s general meetings.

You are also required to appoint an auditor for each financial year. An auditor’s job is to report back to a company’s members and the government about the company’s accounts. They are meant to give a true and fair view of the company’s financial records and whether they have been done properly.

Workplace pensions

UK companies are required to put certain employees into a pension scheme, a process called ‘automatic enrolment’. If you employ at least one person aged between 22 and state pension age, who earns more than £10,000 per year, this applies to you. 

Business licences

A business licence is a permit issued by the government or a professional body that outlines how specific business activities should be carried out. The most easily recognisable example is that of a liquor licence, which authorises businesses to sell alcohol and under what terms they can do so.

The list of licences is extensive, but you can use HMRC’s online tool to find out which licences your business may need.

steps to complaince obligations

Mastering your compliance obligations is essential for success – this step-by-step guide provides an introduction to understanding & fulfilling them!

Step 1 - Conduct a Self-Assessment and Risk Analysis
Analysis 20%

When getting started, first conduct a self-assessment and risk analysis to identify any current or potential noncompliance issues. Evaluate the nature and breadth of your operations, processes, policies and regulations that may affect your compliance needs. This assessment can identify any areas that require actionable strategies to help ensure compliance maturity at all levels of your organisation.

Step 2 - Research Your Relevant Regulatory Requirements and Standards.
Research 40%

Complying with regulations and standards is an essential step for keeping up with compliance obligations. It’s important to research the relevant regulations and standards that apply to your organisation, in order to understand exactly what is required from you in terms of compliance. Identify any applicable laws, industry standards, or government policies which are relevant to your operations and need to be adhered to, as not doing so could result in harsh penalties for noncompliance.

Step 3 - Identify Gaps Between Your Compliance & Regulations.
Identify Gaps 60%

Once you’ve identified the applicable regulations, standards and policies, it’s important to review your current compliance procedures and ensure that they meet the required expectations. Compare your existing process to the regulations and identify any gaps between the two. If there are any discrepancies or potential risks, it’s essential to address them as soon as possible in order to avoid penalties or other consequences of noncompliance.

Step 4 -Implement an Effective Compliance Program.
Implement Program 80%

Before developing your compliance program, it’s essential to ensure that you understand the expectations and obligations of each applicable regulation. Once you’ve done this, you can create a comprehensive compliance program which will guide you through the process of meeting all legal requirements. This program should include risk and compliance assessments, processes for monitoring and ensuring ongoing compliance, and plans for regularly tracking and improving performance.

Step 5 -Monitor, Measure, and Document Your Compliance Efforts.
Monitor 100%

Once you have developed a compliance program, it is necessary to continuously monitor, measure, and document any efforts to ensure that your organisation is compliant. All changes to processes made as part of ensuring compliance must be tracked and regularly assessed. Your organisation should also institute an effective system for processing internal complaints related to any violations of law or policy. This system will provide critical information that can be used by the compliance team when it comes to improving compliance efforts.

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Miscellaneous benefits in kind

The list of miscellaneous company benefits that can be provided tax-free to employees is quite short. However, some of the benefits that can be provided include the following:

  • Medical insurance or medical treatment for employees working abroad.
  • One annual medical health check and / or health-screening assessment.
  • Exempt loans to employees. There are a number of scenarios where beneficial loans are exempt and employers might not have to report anything to HMRC or pay tax and National Insurance. The most common exemption relates to small loans with a combined outstanding value to an employee of less than £10,000 throughout the whole tax year.
  • Living accommodation. There are special rules for the provision of living accommodation to employees under certain circumstances. In most cases, employees will pay tax on any living accommodation provided by an employer unless they qualify for an exception.

An exception for living accommodation will usually apply in cases where:

  • the accommodation is necessary for an employee to do their job properly; 
  • it’s customary to have living accommodation with the job and it means the employee can perform their job better; and
  • the employee faces a special threat to their security because of their job, and the living accommodation is in place to help protect them.

There is no requirement to pay tax on benefits and expenses covered by concessions or exemptions and they do not need to be included on a tax return.

Source:HM Revenue & Customs| 20-02-2023
P11D Wimbledon UK

What is a P11D in the UK?

A P11D is a statutory form that is used to declare the financial value of your taxable expenses and benefits from your company. In essence, a P11D is completed to report on any expenses or services that benefits the employee but is not given in money (salaries/wages).

Your employer is responsible for keeping track of these benefits on a P11D form (alternatively, they can include it in their payroll system to keep track). You should receive a copy of your P11D from your employer around July every year. 

However, if you are a contractor, freelancer or sole-proprietor you will need to fill the P11D form out yourself to keep track of all your expenses.

WHY DO I NEED A P11D?

A P11D allows you to see all benefits provided by your company and the financial value attached to it. If you are self-employed it is vital for you to accurately complete your P11D for submission to the HMRC. The P11D is used byh the HMRC to determine how much Class 1A NICs need to be paid.

Download P11D example here.

Wimbledon Accountant P11D
Example of P11D information that will be required.

The P11D consists of 14 sub-sections where the employer needs to specify the employee’s benefits. A breakdown of the standard layout and necessary information can be found in the next section of the blog:

Breakdown of P11D

  1. Assets transferred 
    1. Cars, property, goods or other assets.
  2. Payments made on behalf of employee
    1. Tax on notional payments made during the year (A Notional Payment allows you to calculate and deduct the amount of tax and NI on a payment, without actually giving the payment to the employee. The employee won’t receive any more money, they will only pay the extra tax and/or NI.)
  3. Vouchers and credit cards
    1. The cost and any extra cost to you of providing any vouchers (including season tickets) which can be exchanged for:
      1. money
      2. goods
      3. services
    2. All expenses and other payments paid by credit cards you provided, except expenses:
      1. directly in connection with the cars at section F of the P11D
      2. more appropriate to section N of the P11D
    3.  
  4. Living accommodation
    1. Cash equivalent or relevant amount of accommodation provided for the employee, or his/her family or household. Exemptions do not apply if using optional remuneration arrangements.
  5. Mileage allowance payments not taxed at source
    1. Enter the mileage allowances in excess of the exempt amounts only where you’ve not been able to tax this under PAYE. The exemptions do not apply if using optional remuneration arrangements.
  6. Cars and car fuel
    1. If more than 2 cars were made available, either at the same time or in succession, please give details on a separate sheet.
    2. You will need the following information of the vehicles: 
      1. make and model, date of registration 
      2. Approved CO2 emissions figure for cars registered on or after 1 January 1998
      3. Approved zero emissions mileage 
      4. If your hybrid car’s CO2 emissions figure is between 1-50 (inclusive) 
      5. Engine Size
      6. Type of fuel or power used (F – Diesel cars which meet Euro 6d standard, A – Diesel cars, B – All other cars)
      7. Dates car was available
      8. List price of car
      9. All non-standard accessories
      10. Capital contributions the employee made towards the cost of car or accessories
      11. Amount paid by employee for private use of the car
      12. Date free fuel was withdrawn
      13. Cash equivalent or relevant amount for each car
      14. Cash equivalent or amount foregone on fuel for each car
  7. Vans and van fuel 
    1. Total cash equivalent or amount foregone for all vans made available in period
    2. Total cash equivalent or amount foregone on fuel for all vans made available in period
  8. Interest-free and low interest loans
  9. Private medical treatment or insurance
  10. Qualifying relocation expenses payments and benefits
  11. Services supplied
  12. Assets placed at the employee’s disposal
  13. Other items (including subscriptions and professional fees)
  14. Expenses payments made on behalf of the employee
    1. Travelling and subsistence payments – Cost to you or amount foregone except mileage allowance payments for employee’s own car, read section E 
    2. Entertainment – Cost to you or amount foregone trading organisations read P11D Guide and then enter a tick or a cross as appropriate here 
    3. Payments for use of home phone 
    4. Non-qualifying relocation expenses those not shown in sections J or M

If you need assistance in completin yout P11D in the UK please feel free to contact CIGMA Accounting.

We have two offices accounting based in Farringdon, London and Wimbledon, London respectively. However, we are more than happy to assist with remote accounting for yourself or your business. 

Wimbledon Accountant

165-167 The Broadway

Wimbledon

London

SW19 1NE

Farringdon Accountant

Better Space

127 Farringdon Road

London

EC1R 3DA

Vehicle benefit charges from April 2023

The vehicle benefit charges for 2023-24 have been announced. Where employees are provided with fuel for their own private use by their employers, the car fuel benefit charge is also applicable. The fuel benefit charge is determined by reference to the CO2 rating of the car, applied to a fixed amount. The car fuel benefit charge will increase in 2023-24 to £27,800 (from £25,300). The fuel benefit is not applicable when the employee pays for all their private fuel use.

The standard benefit charge for private use of a company van will increase to £3,960 (from £3,600). A company van is defined as ‘a van made available to an employee by reason of their employment’. There is an additional van fuel benefit charge for a van with significant private use. The limit will increase in 2023-24 to £757 (from £688). If private use of the van is insignificant, then no benefit will apply.

Since 6 April 2021, the van benefit charge has been reduced to zero for vans that produce zero carbon emissions. This measure supports the governments climate change agenda by encouraging the uptake up of vans that emit zero carbon emissions.

Source:HM Revenue & Customs| 16-12-2022

Accommodation expenses and benefits

There are special rules for the provision of living accommodation to employees under certain circumstances. In most cases, employees will pay tax on any living accommodation provided by an employer unless they qualify for an exception. However, where an employee qualifies for an exception, there is no tax to pay on the provision of living accommodation. The definition of living accommodation includes houses, flats, houseboats, holiday homes and apartments. It does not include hotel rooms or board and lodgings.

An exception for living accommodation will usually apply in cases where:

  • the accommodation is necessary for an employee to do their job properly;
  • it’s customary to have living accommodation with the job and it means the employee can perform their job better; and
  • the employee faces a special threat to their security because of their job, and the living accommodation is in place to help protect them.

HMRC publishes a list of some of the main occupations that typically provide living accommodation. This includes agricultural workers living on farms or estates, pub and off-license managers living on premises, police officers and prison governors.

Employees provided with living accommodation can also be provided with other related benefits such as:

  • heating and lighting the accommodation;
  • the repair, maintenance and decoration of the interior;
  • the cost of servants, gardeners etc; and
  • provision of furniture, domestic appliances and other equipment.
Source:HM Revenue & Customs| 05-09-2022