Taxable employment benefits from April 2026

From April 2026, the government will mandate the reporting and paying of Income Tax and Class 1A National Insurance Contributions on benefits in kind via payroll software. This represents a significant change to the current system and should reduce the administrative requirements and simplify the tax system for both employers and employees.

This means that the 2025-26 tax year will be the last year that employers will be able to file P11Ds and P11D(b)s with HMRC in most cases. From April 2026, tax on employment benefits will be collected in real time and not through tax codes in arrears. Class 1A National Insurance contributions will also be collected in real time for each pay period rather than at the end of the year. HMRC has said that this change will remove the need for 4 million end of year returns to be submitted.

HMRC has said that they will engage with stakeholders to discuss their proposals to inform design and delivery decisions and draft legislation will be published later in the year as part of the usual tax legislation process. HMRC will also work with industry experts to produce guidance, which will be made available in advance of 2026.

Source:HM Revenue & Customs | 15-04-2024

Using the starter PAYE checklist

Employers that take on a new employee need to work out which tax code and starter declaration to use in their payroll software. Incorrect tax codes can lead to a new employee paying more tax than is due.

Employers will require certain information from their new employee in order to ensure that the correct tax code and starter declaration information is entered on the payroll software. In most cases, all the necessary information can be found on the employees P45. It is important to remind new employees to bring this with them on their first day of work.

If the employee does not have a P45 the necessary information can be collected by asking the new employee to complete HMRC's online starter PAYE checklist. A paper version can also be completed if the new employee is unable to use the online version. This information must be held in the employers’ payroll records for the current year and the 3 following tax years. Once the information has been collated, HMRC’s online tool can be used to work out the employee’s tax code.

The starter checklist can be used by a new employee if:

  • they have a student or postgraduate loan;
  • their personal details are different to those shown on their P45;
  • they do not have a P45; and
  • they have been sent to work temporarily in the UK by their overseas employer.

Once the checklist has been completed, the new employee should email, post or give the completed list to their employer. There is no requirement to send the checklist to HMRC.

Source:HM Revenue & Customs | 08-04-2024

What are the off-payroll working rules?

The rules for individuals providing services via an intermediary such as a personal service company (PSC) are complex. The rules apply if the worker who provides services to a client through their own intermediary would have been an employee if they were providing their services directly to that client.

The off-payroll working rules usually shift the responsibility for deciding whether the intermediaries’ legislation applies, known as IR35, from the intermediary itself to the client receiving the service. In most cases, the client will be responsible for determining the employment status of the worker. However, if a worker provides services to a small client outside the public sector, the worker’s intermediary is responsible for deciding the worker’s employment status and if the rules apply.

You may be affected by these rules if you are:

  • a worker who provides their services through their own intermediary to a client;
  • a client who receives services from a worker through their intermediary; or
  • an agency or other supplier providing workers’ services through their intermediary.

There are different rules that apply to those working for a small business and those working for medium or large-sized businesses.

Private sector companies and voluntary sector organisations are considered medium or large-sized if they meet two or more of the following conditions:

  • have an annual turnover of more than £10.2 million;
  • have a balance sheet total of more than £5.1 million; 
  • have more than 50 employees.

There are a number of scenarios that fall outside the off-payroll working rules. If you think you might be affected, we would be happy to help with looking at this issue.

Source:HM Revenue & Customs | 25-03-2024

Apprenticeships boost

From the start of April 2024, the government will increase the amount of funding that employers who are paying the apprenticeship levy can pass onto other businesses. Apprenticeships can currently be funded by a levy paying employer transferring up to 25% of their unused levy to a different employer. 

Under the new measures, large employers who pay the apprenticeship levy will be able to transfer up to 50% of their funds to support other businesses, including smaller firms, to take on apprentices. This will help SMEs hire more apprentices by reducing costs and enabling more employers to get the skilled workers they need while unlocking more opportunities for young people in a huge range of sectors, industries, and professions. 

Hundreds of large levy-paying employers have already taken advantage of the opportunity to transfer their unused levy funds to other businesses. As of December 2023, 530 employers including ASDA, HomeServe and BT Group had pledged to transfer over £35.39 million to support apprenticeships in businesses of all sizes.

Government has also announced an additional £60m of new government funding to fully fund apprenticeships in small businesses from 1 April 2024 by paying the full cost of training for anyone up to the age of 21 years.

This will remove the need for small employers to meet some of the cost of training and saves time and costs for providers like further education colleges who currently need to source funding separately from the government and businesses. 

Source:Other | 18-03-2024

Childcare support from HMRC

Parents may be eligible to receive childcare support from HMRC using the Tax-Free Childcare (TFC) scheme. The TFC scheme can help parents of children aged up to 11 years old (17 for those with certain disabilities) to pay for approved childcare.

The TFC scheme assists working families with their childcare costs. There are many registered childcare providers including childminders, nurseries, breakfast and after school clubs and approved play schemes signed up across the UK. Parents can pay into their account regularly and save up their TFC allowance to use during school holidays. 

The TFC scheme provides for a government top-up on parental contributions. For every £8 contributed by parents an additional £2 top up payment will be funded by Government up to a maximum total of £10,000 per child per year. This will give parents an annual saving of up to £2,000 per child (and up to £4,000 for disabled children until the age of 17) in childcare costs. 

The TFC scheme is open to all qualifying parents including the self-employed and those on a minimum wage. The scheme is also available to parents on paid sick leave as well as those on paid and unpaid statutory maternity, paternity and adoption leave. In order to be eligible to use the scheme parents will have to be in work at least 16 hours per week and earn at least the National Minimum Wage or Living Wage. If either parent earns more than £100,000, both parents are unable to use the scheme.

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

Check if you need to pay someone through PAYE

Employers usually have to pay employees through PAYE if they earn £123 or more a week (£533 a month or £6,396 a year). There is no requirement to pay self-employed workers through PAYE.

HMRC’s guidance states that:

As a general rule, someone is:

  • employed if they work for you and do not have any of the risks associated with running a business; and
  • self-employed if they run their own business and are responsible for its success or failure.

There are specific rules for temporary or agency workers. Employers need to operate PAYE on temporary workers that they pay directly, as long as they’re classed as an employee. There is not usually a requirement to operate PAYE if a worker is paid by an agency, unless the agency is based abroad and does not have either a trading address or a representative in the UK.

Employers that take on a new employee need to work out which tax code and starter declaration to use in their payroll software. Incorrect tax codes can lead to the new employee paying more tax than is due.

The necessary information can be collected from the employee’s P45 or by asking the new employee to complete HMRC's starter checklist (if they do not have a recent P45 – this checklist replaced the P46).

Source:HM Revenue & Customs| 09-10-2023
national insurance contributions for self-employed; wimbledon accountant

Class 2 and Class 4 NICs: Quick Reference for Self-Employed Individuals in the UK

How to claim work from home tax relief in the UK

When you’re self-employed in the UK, understanding your National Insurance contributions (NICs) is critical for both compliance and for securing your future benefits such as the State Pension. For the 2023-24 tax year, the HMRC highlights two primary classes of NICs that self-employed individuals need to be familiar with: Class 2 NICs and Class 4 NICs. Here’s a quick reference of what these contributions mean for you.

What are Class 2 NICs?

Class 2 National Insurance Contributions are payable by almost all self-employed individuals. However, if you earn under the Small Profits Threshold (SPT), which is currently set at £6,725 for the 2023-24 tax year, you are exempt from these payments.

Key Features:

  • Rate: The flat weekly rate for Class 2 NICs is £3.45.
  • Benefits: Payments count towards the basic State Pension, employment and support allowance, maternity allowance, and bereavement benefits.

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What are Class 4 NICs?

If you’re self-employed and your annual profits exceed £12,570, you’re also required to pay Class 4 NICs in addition to Class 2 NICs.

Key Features:

  • Rates: Class 4 NIC rates for 2023-24 are 9% on chargeable profits between £12,570 and £50,270. An additional 2% is payable on any profits over £50,270.

are you exempt?

There are a few professions where Class 2 NICs are not applicable. These include:

  • Examiners, moderators, invigilators, and people who set exam questions.
  • People who run businesses involving land or property.
  • Ministers of religion who do not receive a salary or stipend.
  • Individuals making investments for themselves or others, but not as a business and without a fee or commission.

If you belong to any of these categories, it may be beneficial for you to get a State Pension forecast and consider making voluntary Class 2 NICs to make up for missing years.

Next steps

  1. Calculate Your Earnings:
    Verify if you cross the Small Profits Threshold or the £12,570 limit for Class 4 NICs.
  2. Check Exemptions:
    Ensure that you don’t fall under any of the categories that are exempt from Class 2 NICs.
  3. State Pension Forecast:
    It’s wise to check your State Pension forecast to understand how your NICs impact your future benefits.
  4. Consult an Expert:
    Given the intricacies, it might be beneficial to consult with a tax advisor or accounting professional to help you navigate the NIC landscape.

Understanding your National Insurance contributions is vital for financial planning and fulfilling your tax obligations. If you have more questions about how these classes apply to your situation, feel free to get in touch with us.


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Emergency tax codes

The letters in an employee’s tax code signify their entitlement (or not) to the annual tax free personal allowance. The tax codes are updated annually and help employer’s work out how much tax to deduct from an employee’s pay packet. 

The basic personal allowance for the tax year starting 6 April 2023 is £12,570 and the tax code for an employee entitled to the standard tax-free Personal Allowance 1257L. This is the most common tax code and is used for most people with one job and no untaxed income, unpaid tax or taxable benefits (for example a company car).

Emergency tax codes can be used if HMRC does not receive a taxpayer’s income details in time after a change in circumstances such as:

  • a new job
  • working for an employer after being self-employed
  • getting company benefits or the State Pension

Employees on an emergency tax code will see one of the following codes on their payslip:

  • 1257L W1
  • 1257L M1
  • 1257L X

These codes mean that an employee’s tax calculation is based only on what they are paid in the current pay period. The emergency tax codes are temporary and will usually be updated once the necessary details about previous income or pension payments are sent to HMRC.

Source:HM Revenue & Customs| 24-07-2023
hmrc deadlines july and august 2023; london accountant; wimbledon accountant

Key HMRC Deadlines for July and August 2023 You Need to Know

Key HMRC Deadlines for July and August 2023

As we step into July and August 2023, it’s essential to stay updated with the upcoming deadlines from HM Revenue and Customs (HMRC). Here’s a comprehensive guide to help you navigate these crucial dates and ensure that your business remains tax compliant.

1 July 2023 – Corporation Tax
The due date for corporation tax for the fiscal year ending 30 September 2022 is 1st July 2023. This deadline applies to corporations and businesses operating within the UK, and it pertains to the tax owed on all profits from your trading, investments, and chargeable gains. Ensure your business has calculated and prepared to pay its tax liability by this date.

 

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6 July 2023Forms P11D and P11D(b)
By 6th July 2023, businesses should complete and submit the P11D and P11D(b) forms. These forms concern the return of benefits and expenses (P11D) and the return of Class 1A National Insurance Contributions (NICs) (P11D(b)). This obligation primarily concerns employers who have provided certain benefits to their directors or employees.

19 July 2023 – Class 1A NICs
The payment for Class 1A NICs is due by 19 July 2023. However, if you plan to pay electronically, the deadline extends to 22 July 2023. This payment pertains to employers who have provided benefits such as company cars to their employees.

19 July 2023 – PAYE and NIC deductions
PAYE and NIC deductions for the month ending 5 July 2023 must be made by 19 July 2023. If you opt to make your payment electronically, the due date extends to 22 July 2023. This deadline applies to all employers who deduct PAYE and NICs from their employees’ wages.

19 July 2023 – CIS300 monthly return and CIS tax
The deadline for filing the CIS300 monthly return for the month ending 5 July 2023, and payment of the CIS tax deducted for the same period, is 19 July 2023. This applies to contractors operating under the Construction Industry Scheme (CIS).

1 August 2023 – Corporation Tax
For the fiscal year ended 31 October 2022, the due date for corporation tax is 1 August 2023. All corporations and businesses operating within the UK need to ensure they’ve prepared to meet this deadline.

19 August 2023 – PAYE and NIC deductions
For the month ending 5 August 2023, the PAYE and NIC deductions are due by 19 August 2023. Electronic payments can be made until 22 August 2023. All employers deducting PAYE and NICs from their employees’ wages need to take note of this deadline.

19 August 2023 – CIS300 monthly return and CIS tax
The filing deadline for the CIS300 monthly return and payment for the CIS tax deducted for the month ending 5 August 2023 is 19 August 2023. This is crucial for contractors operating under the CIS.

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national insurance guide; london accountant; UK national insurance contributions; national insurance rates

Understanding National Insurance: Contributions, rates and employers

National Insurance (NI) is an essential part of the UK’s tax system, but it is often misunderstood. If you are new to the UK or starting your first job, understanding National Insurance contributions can be confusing, and you may be left wondering – how is National Insurance calculated? In this blog post, we will explain what National Insurance contributions are and how they differ from income tax, what services NI payments fund, National Insurance rates, and finding your National Insurance number.

 

What is National Insurance and how is it different from income tax?

National Insurance (NI) is an essential part of the UK’s tax system, but it is often misunderstood. If you are new to the UK or starting your first job, understanding National Insurance contributions can be confusing, and you may be left wondering – how is National Insurance calculated? In this blog post, we will explain what National Insurance contributions are and how they differ from income tax, what services NI payments fund, National Insurance rates, and finding your National Insurance number.

 

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What services do National Insurance CONTRIBUTIONS fund?

National Insurance contributions go towards a range of services and benefits provided by the UK government. The main services and benefits that NI payments fund are:

  • The State Pension.
  • Jobseeker’s Allowance.
  • Employment and Support Allowance.
  • Maternity Allowance
  • Widowed Parent’s Allowance.
  • Bereavement Support Payment.
  • The National Health Service (NHS).
  • Personal Independence Payment (PIP).
 

Who pays for National Insurance and what are National Insurance rates?

If you are employed, you and your employer will both have to pay National Insurance contributions. The amount you pay will depend on how much you earn. The current rate for employees is 12% on earnings between £242 and £967 per week, and 2% on earnings above £967 per week. Your employer will also pay 13.8% of your earnings above £175 per week.

If you are self-employed, you will need to pay Class 2 and Class 4 National Insurance contributions. Class 2 contributions are a fixed weekly amount of £3.45, and Class 4 contributions are based on your profits. The current rate for Class 4 contributions is 9% on profits between £12,570 and £50,270 and 2% on profits over £50,270.

For those working abroad, you can read our blog post on overseas NI contributions.

 

What are the benefits of paying National Insurance contributions?

Paying National Insurance contributions can provide you with access to a range of state benefits, including the State Pension, maternity and paternity pay, and sick pay. It can also help you to qualify for contributions-based Jobseeker’s Allowance and Employment and Support Allowance if you are unable to work due to illness or disability.

In addition to providing you with access to state benefits, paying National Insurance contributions can also help you to build up a National Insurance record, which is used to calculate your State Pension entitlement. To qualify for the full State Pension, you will need to have paid or been credited with enough National Insurance contributions.

 

UK national insurance contributions; london accountant; how is national insurance calculated

Can I make voluntary NI contributions?

If you are not employed or self-employed, you may still be able to make voluntary National Insurance contributions. This can be beneficial if you have gaps in your National Insurance record, for example, if you have taken time out of work to care for children or have lived abroad.

Voluntary contributions can help you to build up your National Insurance record and may help you to qualify for certain state benefits, including the State Pension. The amount you pay and the benefits you receive will depend on the type of voluntary contributions you make. 

There are two types of voluntary NI contributions:

Class 3 contributions:
These are voluntary contributions that you can make to fill gaps in your National Insurance record. The current rate for Class 3 contributions is £15.40 per week. You can make Class 3 contributions for any tax year in which you have a gap in your National Insurance record.

Class 2 contributions:
These are voluntary contributions that you can make if you are self-employed but have not earned enough to be required to pay Class 2 contributions. The current rate for Class 2 contributions is £3.05 per week. Paying Class 2 contributions voluntarily can help you to build up your National Insurance record and qualify for state benefits.

 

It is worth noting that voluntary contributions may not always be the best option for everyone. Before making any voluntary contributions, you should speak to a financial advisor or contact HM Revenue and Customs (HMRC) for advice on your individual circumstances.

 

How to find your National Insurance Number

Your National Insurance Number (NIN) is a unique identifier used by HM Revenue and Customs (HMRC) to track your National Insurance contributions and ensure that you are paying the correct amount. If you are unsure of your NIN, there are several ways to find it:

  1. Check your payslip – Your NIN should be printed on your payslip. If you are employed, your employer should have your NIN on file and include it on your payslip.
  1. Check official documents – Your NIN may be listed on official documents such as your P60, tax return, or any correspondence you have received from HMRC.
  1. Contact HMRC – If you are unable to find your NIN, you can contact HMRC and request that they send you a letter confirming your NIN. You will need to provide personal information such as your name, date of birth, and address to verify your identity.
  1. Use the government’s online service – You can use the government’s online service to find your NIN if you have a UK passport or a UK driving licence. You will need to create an account and provide personal information to verify your identity.

It’s important to keep your NIN safe and secure, as it is a valuable piece of personal information that can be used to steal your identity. Never share your NIN with anyone unless you are sure that it is necessary, and always keep it private.

 

Need Assistance from an Accountant?

National Insurance contributions are an important part of the UK’s tax system, and they fund a range of state benefits and services. Understanding National Insurance can be confusing, but it is essential to ensure that you are paying the correct amount and have access to the state benefits that you are entitled to.

If you are unsure about your National Insurance contributions or entitlement to state benefits, you should speak to a financial advisor. Our CIMA-registered accountants at CIGMA Accounting would be happy to assist with any of your personal or business accounting needs. Contact us via the form below for a free quote.


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Tax on public transport season tickets

There are certain tax rules that it is important to be aware of where you pay for the public transport costs of your employees. The provision of public transport costs include:

  • season tickets provided for employees;
  • season ticket costs reimbursed to employees;
  • loans made to employees to buy season tickets; and
  • contributions to subsidised or free public bus transport.

If you are contributing to subsidised or free public bus transport there are no reporting requirements to HMRC, and you do not have to pay any tax or National Insurance on these costs. This is because there is a special exemption in place for subsidies to public bus services. For example, HMRC have confirmed that if you help finance a bus route that gives your employees free or reduced-rate transport between their homes and work or between workplaces, then no taxable benefit arises.

However, if the public transport costs are not exempt then the costs will need to be reported to HMRC with tax and National Insurance implications. This includes where season tickets are provided to your employees, where the cost of a season ticket is reimbursed or where a loan is made to your employee to purchase a season ticket.

Source:HM Revenue & Customs| 15-05-2023

Withholding tips from staff now unlawful

A new law that stops employers from withholding tips from people working in the hospitality, leisure and services sectors has come into force. The Employment (Allocation of Tips) Act 2023 received Royal Assent on 2 May 2023. 

The Bill makes it unlawful for businesses to hold back service charges from their employees, ensuring staff receive the tips they have earned. The measures are expected to come into force in about a year, following a consultation and secondary legislation.

This means that more than 2 million workers will have their tips protected. HMRC has estimated that this new law will mean an estimated £200 million a year will go back into the pockets of hard-working staff by retaining tips that would otherwise have been deducted.

A new statutory Code of Practice will also be developed in order to provide businesses with advice on how tips should be distributed among staff. This Code is being developed and will be subject to formal consultation later this year.

Workers will also be given a new right to request more information relating to their employer’s tipping record, which will help them to bring forward a credible claim to an employment tribunal.

The Business and Trade Minister said:

'As people face rising living costs, it is not right for employers to withhold tips from their hard-working employees. Whether you are pulling pints or delivering a pizza, this new law will ensure that staff receive a fair day’s pay for a fair day’s work – and it means customers can be confident their money is going to those who deserve it.'

Source:Department for Business, Energy & Industrial Strategy| 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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Company cars – working out taxable value

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, which they can then apply to the published advisory fuel rates to repay the cost of fuel used for private travel. 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 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| 01-05-2023

Mobile phones and tax

When an employer incurs costs for the provision of mobile phones to employees it is important to understand the correct tax treatment of these expenses. This includes costs for phones provided to employees and reimbursement of employee’s own phone costs.

As a general rule, the provision of one mobile phone or SIM card to a director or employee for private use is exempt from reporting requirements, tax and National Insurance. The exemption covers the phone itself, any line rental and the cost of private calls paid for by the employer on that phone. The phone contract must be between the employer and the supplier.

If the telephone expenses are not exempt, then they must be reported to HMRC, and employers may have to deduct and pay tax and National Insurance. Employee’s mobile phone expenses do not have to be reported if they are part of a salary sacrifice arrangement.

For example, if an employee arranges the phone but the employer pays the supplier then the employer must:

  • report the cost on form P11D; and
  • pay Class 1 National Insurance through payroll.

HMRC also make it clear that there remain devices that have telephone functionality which do not qualify as mobile phones. The tax exemption applies only to devices primarily designed for voice communication. For example, the rules do not apply to tablets, PDAs and other similar devices.

Source:HM Revenue & Customs| 24-04-2023
SWAPs, sector-based work academies, london accountant, unemployment benefits

SWAPs: What are Sector-based Work Academies?

Are you receiving unemployment benefits and looking to kickstart your career in a specific industry but struggling to find a way in? If so, you may want to consider a Sector-based Work Academy Programme (SWAP) in the UK. SWAPs are designed to provide job seekers with the skills and knowledge they need to succeed in a particular sector, and they can also be cost-effective tools for recruiting trained workers to your business.

In this blog post, we’ll explore what SWAPs are, how they work, and the benefits they offer to job seekers in the UK.

 

What are Sector-based Work Academies (SWAPs)?

A Sector-based Work Academy Programme (SWAP) is a training and work experience programme that is designed to help job seekers acquire the skills and knowledge they need to succeed in a particular industry or sector.

These programmes are typically offered by employers, training providers, and job centres, and they provide participants with the opportunity to gain valuable work experience, develop new skills, and improve their employability.

How do SWAPs work?

SWAPs typically consist of three key components: pre-employment training, work experience, and a guaranteed job interview. The pre-employment training provides participants with the skills and knowledge they need to succeed in the sector they’re interested in, such as technical skills, industry-specific knowledge, and employability skills like communication and teamwork. This training can take place in a classroom setting, online, or through on-the-job training.

After completing the pre-employment training, participants will typically undertake a work experience placement with an employer in their chosen sector. This provides them with the opportunity to apply their newly acquired skills and knowledge in a real-world setting, and to gain valuable experience and contacts in the industry.

Finally, upon completing the work experience placement, participants are guaranteed a job interview with the employer they completed the placement with. This provides a fantastic opportunity for participants to secure a job in their chosen sector, and to put their new skills and knowledge into practice in a paid role.

 

Who is eligible for SWAPs?

If you are claiming Universal Credit, JSA or ESA, live in England or Scotland, and are looking for work, then you qualify for joining a Sector-based Work Academy. Contact your job coach to learn about available programmes.

SWAPs for individuals over 50 who are looking to return to the workforce have also recently been created. This is part of the UK government’s ‘Returnership’ initiative.

How swaps can help those on unemployment benefits

SWAPs offer a range of benefits to job seekers in the UK. Firstly, they provide participants with the skills and knowledge they need to succeed in a particular sector, which can significantly improve their employability and job prospects. Additionally, the work experience component of SWAPs allows participants to gain valuable experience and contacts in the industry, which can help them to secure a job in the future.

SWAPs; sector-based work academies; unemployment benefits; london accountant

How SWAPs Benefit Businesses and Employers

Sector-based Work Academy Programmes (SWAPs) can be highly beneficial to businesses in a number of ways. Firstly, by providing pre-employment training and work experience placements, SWAPs enable businesses to identify and recruit talented individuals who are committed to working in their sector. This can help to reduce recruitment costs and streamline the recruitment process, as employers can be confident that the candidates they interview have the skills and knowledge required for the job.

SWAPs can also help to address skills shortages in particular industries or sectors. By providing targeted training and work experience, SWAPs can help to ensure that businesses have access to a skilled workforce, which can be crucial in industries where skills shortages are a common problem.

Finally, SWAPs can help businesses to build positive relationships with their local communities. By offering training and work experience opportunities to local job seekers, businesses can demonstrate their commitment to supporting the local economy and helping people to find employment.

How Businesses Can Get Involved with a SWAP

If you’re a business owner or employer who is interested in getting involved with a Sector-based Work Academy Programme (SWAP), there are several ways to do so. One option is to contact your local Jobcentre Plus, who can provide you with information about SWAPs that are running in your area.

Another option is to contact a training provider or college that offers SWAPs. These organisations can provide you with more information about the content and structure of SWAPs, as well as the benefits they offer to businesses.

Finally, you can also consider partnering with other businesses in your sector to develop a SWAP. By working together, businesses can pool their resources and expertise to create a SWAP that meets the needs of their sector, while also benefiting their individual businesses.

Overall, getting involved with a SWAP can be a fantastic way for businesses to access a skilled workforce, address skills shortages, and build positive relationships with their local communities.

 

IS A SWAP RIGHT FOR YOU OR YOUR BUSINESS?

If you’re looking to kickstart your career in a particular sector, a Sector-based Work Academy Programme (SWAP) in the UK could be the perfect solution. By providing pre-employment training, work experience, and a guaranteed job interview, SWAPs offer job seekers the skills, knowledge, and experience they need to succeed in their chosen industry. 

Importantly, SWAPs can also be effective tools for employers to recruit individuals committed to working in their sector, and to train those workers in the skills your business needs using government funding.

Contact CIGMA Accounting today for advice on the most tax-effective ways to recruit, train, and employ the people your business needs.

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What is the UK minimum wage; london accountants

What is the UK Minimum Wage for 2023?

Knowing the latest minimum wage regulations in the UK is essential for both employers and employees. This guide will help you understand who qualifies for the minimum wage, what jobs can pay below it, and how the minimum wage changes with age.

Who Qualifies for the National Living Wage?

The National Living Wage is the minimum hourly rate employers must pay their workers age 25 and over. It was introduced in April 2016 as part of a government move to ensure that everyone earns at least a living wage. Currently, the National Living Wage is £9.50 per hour for anyone aged 23 and over.

This rate needs to be reviewed every April by the government, and will be increasing to £10.42 in 2023.

What Are the Current Rates in the UK?

The National Living Wage of £9.50 per hour applies to all employees aged 23 and over who are eligible to receive it, and is guaranteed to increase every April. Lower rates apply to those younger than 23:

  • £9.18 for those aged 21 to 22.
  • £6.83 for those aged 18 to 20.
  • £4.81 for those aged under 18.
2023 UK minimum wage rates

Is The Minimum Wage Paid to Apprentices Different?

Yes, the minimum wage rate for apprentices aged under 19 or in their first year of an apprenticeship is £4.81 per hour, regardless of age. Apprentices aged 19 or over and who have completed their first year of an apprenticeship are entitled to receive the same rate as other employees who fall into their age bracket.

Moreover, apprentices must receive at least time-and-a-half for any hours they work over 40 hours in a week.

How will the minimum wage change in 2023?

The minimum wage will be increasing in April of 2023, as it does every year. Below is the full table of current rates and their 2023 increase.

 23 and over21 to 2218 to 20Under 18Apprentice
April 2022£9.50£9.18£6.83£4.81£4.81

April 2023

£10.42£10.18£7.49£5.28£5.28

Do The Regulations Apply to All Employees?

Yes, the minimum wage rate must be paid to every worker aged 16 and over, regardless of whether they are a part-time, casual employee or working full-time on a permanent contract. In addition, it is illegal for employers to pay apprentices under 19 (and those in their first year of an apprenticeship) less than £4.15 per hour. Employers are also required to keep records showing that all workers have been paid at least the national minimum wage.

Some workers are not entitled to the minimum wage, such as self-employed individuals, company directors, volunteers, and workers younger than school leaving age (usually 16).

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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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Beneficial loans that are exempt

An employee can obtain a benefit when provided with an employment-related cheap or interest-free loan. The benefit is the difference between the interest the employee pays, if any, and the commercial rate the employee would have to pay on a loan obtained elsewhere. These types of loans are referred to as beneficial loans.

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.

The list also includes loans provided:

  • in the normal course of a domestic or family relationship as an individual (not as a company you control, even if you are the sole owner and employee);
  • to an employee for a fixed and invariable period, and at a fixed and invariable rate that was equal to or higher than HMRC’s official interest rate when the loan was taken out;
  • under identical terms and conditions to the general public as well (this mostly applies to commercial lenders);
  • that are ‘qualifying loans’, meaning all of the interest qualifies for tax relief; and
  • using a director’s loan account as long as it’s not overdrawn at any time during the tax year.
Source:HM Revenue & Customs| 20-02-2023

Tax codes for employees

The P9X form is used to notify employers of the tax codes to use for employees. The latest version of the form has been published and shows the tax codes to use from 6 April 2023. The form states that the basic personal allowance for the tax year starting 6 April 2023 will, as expected, be £12,570 (£12,570 in 2022-23) and this means that the tax code for emergency use will remain at 1257L.

The basic rate limit will be £37,700 (£37,700 in 2022-23) except for those defined as Scottish taxpayers who have a lower basic rate limit as well as an intermediate rate. The new form P9X is available online on GOV.UK to download or print.

The P9X (2023) form also includes information to help employers in the new tax year. The document also reminds employers that have new employees starting work between 6 April and 24 May 2023 and who provide you with a P45 to follow the instructions at www.gov.uk/new-employee.

Source:HM Revenue & Customs| 20-02-2023

PAYE and overseas employees

There are a multitude of rules and regulations that you must be aware of when you employ someone from abroad who is coming to work in the UK.

HMRC’s guidance (entitled New employee coming to work from abroad) sets out some important issues to be aware of when taking on a new employee from abroad.

This includes the following:

  • Check an employee’s right to work in the UK
  • Paying tax and National Insurance contributions
  • National Insurance contributions 
  • Modified PAYE arrangements
  • Payments
  • Work done in and outside the UK
  • Short term business visitors

UK employers must operate PAYE and NICs for employees from abroad regardless of whether they are working on a temporary or permanent basis. This also applies to seconded employees who are being paid by an overseas company. The UK employer is responsible for reporting earnings and PAYE deductions in the same way as for a UK employee.

New employees from abroad will not have a P45 so you will need to obtain all the pertinent information to set them up and report to HMRC on a Full Payment Submission (FPS). 

This includes their full name, gender, date of birth, full address and National Insurance number (if the employee knows it). The employer will also need a completed starter declaration and should enquire if the new employee has an existing student loan. 

Source:HM Revenue & Customs| 16-01-2023

Actors and entertainers – profession or employment

There is a particular section of internal HMRC’s manuals that deals specifically with how to view the rules for measuring profits of specific trades. The list includes over 50 different trades as diverse as actors, athletes, barristers, bookmakers, motor dealers, care providers, doctors and dentists, financial traders, marine pilots, missionaries, pawnbrokers and subcontractors.

The section on actors and other entertainers states these people may be engaged under either a contract for services, the profits of which are taxable as professional profits, or a contract of employment, which is taxable as employment income.

Existing case law sometimes supports the view that individual contracts are not always contracts of employment.

HMRC’s guidance states the following:

Accordingly, performer’s/artist’s earnings will be liable as the profits of a profession in many cases. The sort of engagement where an employment and PAYE may be appropriate, is more likely to be in circumstances where a performer/artist is engaged for a regular salary to perform in a series of different productions over a period of time, in such roles as may be from time to time stipulated by the engager, with a minimum period of notice before termination of the contract. This would apply for example to permanent members of some orchestras and permanent members of an opera, ballet or theatre company. An employment and PAYE would apply in these cases regardless of the receipt by the performer/artist of other income correctly chargeable as profits of a profession.

Source:HM Revenue & Customs| 16-01-2023

Redundancy pay

If you have been in the same job for two or more years and are made redundant you will usually be entitled to redundancy pay. The legal minimum that you are entitled to receive is known as ‘statutory redundancy pay’. There are exceptions where you are not entitled to statutory redundancy pay, for example, if your employer offers to keep you on or offers you suitable alternative work which you refuse without good reason.

The amount of statutory redundancy pay you are entitled to is dependent on your age and your length of service.

The payment is calculated based on the following:

  • Under 22 – half a week’s pay for each full year of service.
  • Aged 22 to 40 – one week’s pay for each full year of service.
  • Over 41 – one and half week’s pay for each full year of service.

Weekly pay is capped at £571, and the maximum length of service is capped at 20 years. In addition, the maximum statutory redundancy pay you can receive is capped at £17,130 in 2022-23. There are slightly higher maximums in Northern Ireland.

Of course, an employer can decide to make a higher payment, or you may be entitled to one as a result of your employment contract.

There is an overall £30,000 limit for redundancy pay which is tax free, regardless of whether this is your statutory redundancy pay or a higher pay-out from your employer.

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

Exempt company cars and fuel benefits

Most employers and employees are aware of the additional costs of providing company cars and the tax implications they create. However, for many employees the attraction of having a company car means that in spite of any tax disadvantages, this remains a popular option. There are circumstances where it can be possible to offer employees car benefits that are exempt from tax.

These include:

Cars available for business journeys only

This rule has been the subject of much case law over the years, but it has generally been established that to qualify for VAT recovery the car must not be available for any private use.

This means that the car should only be available to staff during working hours for employment related duties or to travel to a temporary workplace. The business must also clearly tell their employees not to use the vehicle for private journeys and check that they do not.

Cars adapted for an employee with a disability

These cars are exempt if the only private use is for journeys between home and work and for travel to work-related training.

Fuel paid for by employees

The fuel benefit is removed when an employee pays for all their private fuel use or if the employer pays and the employee reimburses the amount (during the tax year).

'Pool' cars

Employers are not required to pay or report on 'pool' cars. These are cars that are shared by employees for business purposes only, and normally kept on the business premises. Employers must ensure the ‘pool’ car rules are observed.

Privately owned cars

Employers do not have to pay anything on cars that directors or employees own privately.

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

Don’t forget those trivial benefits

Don’t forget to take advantage of tax-free trivial benefits. If you are an employer and looking to give your employees a small token of appreciation then your best option is probably to give them a gift. In order to ensure that this is not a taxable gift, it is important to ensure that the trivial benefits in kind (BiK) rules apply.

There is no tax to pay on trivial benefits in kind (BiK) provided to employees where all of the following apply:

  • the benefit 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.

So, for example a food gift that costs £45 would qualify as would a £15 bottle of wine. It is also possible to provide employees with a gift voucher (not a cash-voucher) where the value is £50 or less. It is important to remember that the gifts must not be provided in recognition of the employees’ services but merely as a gesture of goodwill.

There is an annual cap for directors of a ‘close’ company of £300 per year. If the gifts have a value of over £50 or cannot be counted as a trivial benefit, then the gift must be reported on form P11D and Class 1A NICs will be payable on the value of the gift.

Source:HM Revenue & Customs| 05-12-2022

What is a salary sacrifice?

A salary sacrifice arrangement is an agreement to reduce an employee’s entitlement to pay, usually in return for a non-cash benefit. The tax and NIC advantages of certain benefits provided as part of a salary sacrifice arrangement were removed from 6 April 2017. The change removed the income tax and employer NIC advantages of certain benefits provided as part of salary sacrifice arrangements such as mobile phones and workplace parking. There was a transitional plan in place for certain benefits that ended on 6 April 2021.

The following benefits are currently not subject to Income Tax or National Insurance contributions and do not have to be reported to HMRC:

  • payments into pension schemes;
  • employer provided pensions advice;
  • workplace nurseries;
  • childcare vouchers and directly contracted employer provided childcare that started on or before 4 October 2018, and
  • bicycles and cycling safety equipment (including cycle to work).

If an employee wants to opt in or out of a salary sacrifice arrangement, the employer must alter their contract with each change. The employee’s contract must be clear on what their cash and non-cash entitlements are at any given time.

It may also be necessary to change the terms of a salary sacrifice arrangement where a lifestyle change significantly alters an employee’s financial circumstances. This may include marriage, divorce and a partner becoming redundant or pregnant. Salary sacrifice arrangements can allow opting in or out in the event of lifestyle changes like these.

Source:HM Revenue & Customs| 05-12-2022

Reminder of working from home allowances

Employees who work from home may be able to claim tax relief for bills they pay that are related to their work.

Employers may reimburse employees for the additional household expenses incurred through regularly working at home. The relief covers expenses such as business telephone calls or heating and lighting costs. Expenses that cover private and business use (such as broadband) cannot be claimed. Employees may also be able to claim tax relief on equipment they have bought, such as a laptop, chair or mobile phone.

Employers can pay up to £6 per week (or £26 a month for employees paid monthly) to cover an employee’s additional costs if they have to work from home. Employees do not need to keep any specific records if they receive this fixed amount.

If the expenses or allowances are not paid by the employer, then the employee can claim tax relief directly from HMRC. Employees will receive tax relief based on their highest tax rate. For example, if they pay the 20% basic rate of tax and claim tax relief on £6 a week, they will receive £1.20 per week in tax relief (20% of £6). Employees can claim more than the quoted amount but will need to provide evidence to HMRC. HMRC will accept backdated claims for up to 4 years.

Employees may also be able to claim tax relief for using their own vehicle, be it a car, van, motorcycle or bike. As a general rule, there is no tax relief for ordinary commuting to and from the place of work. The rules are different for temporary workplaces where the expense is usually allowable or if an employee uses their own vehicle to undertake other business-related mileage.

Note, that if an employee agreed with their employer to work at home voluntarily, or they choose to work at home, they cannot claim tax relief on the bills they have to pay. If an employee previously claimed tax relief when they worked from home because of coronavirus (COVID-19), they might no longer be eligible for relief.

Source:HM Revenue & Customs| 21-11-2022
What your tax code means

What your tax code means

The letters in your tax code signify your entitlement (or not) to the annual tax-free personal allowance. The tax codes are updated annually and help employer’s work out how much tax to deduct from an employee’s pay packet. 

The basic personal allowance for the current tax year, which started on 6 April 2022, is £12,570. The corresponding tax code for an employee entitled to the standard tax-free Personal Allowance 1257L. This is the most common tax code and is used for most people with one job and no untaxed income, unpaid tax or taxable benefits (for example a company car).

There are many other numbers and letters that can appear in your tax code. For example, there are letters that show where an employee is claiming the marriage allowance (M) or where their income or pension is taxed using the Scottish rates (S). The basic rate limit for 2022-23 is £37,700 except for those defined as Scottish taxpayers who have a lower basic rate limit as well as an intermediate rate. If your tax code numbers are changed this usually means your personal allowance has been reduced.

There are also emergency tax codes (W1 or M1) which can be used if a new employee doesn’t have a P45. These codes mean that an employee’s tax calculation is based only on what they are paid in the current pay period.

If your tax code has a 'K' at the beginning, this means that deductions due for company benefits, state pension or tax owed from previous years are greater than your personal allowance. However, the tax deduction for each pay period can’t be more than half your pre-tax pay or pension.

It is important to check your tax code to ensure the correct information is being used. If you have any queries we can help, or you can check with your employer or HMRC.

Source:HM Revenue & Customs| 07-11-2022
Directors and National Minimum Wage

Directors and National Minimum Wage

Company directors or any other person who has been appointed to a position by a company or organisation but doesn’t have a contract or receive regular payment as office holders are neither employees nor workers.

Company directors who also have an employment or worker's contract can be both an office holder and an employee at the same time. If this is the case, the director would need to be paid the relevant National Minimum Wage (NMW) or National Living Wage (NLW).

If there is no employment contract or other evidence of an intention to create an employer/worker relationship for a company director, then the NMW / NLW minimum rates will not apply. A contract of employment can be written, expressed orally or implied.

The directors would only be covered by the NMW / NLW if they were also defined as a worker in the relevant Act.

A worker is defined in the National Minimum Wage Act 1998, section 54(3) as someone who has entered into or works under (or, where the employment has ceased, worked under):

  • a contract of employment; and
  • any other contract by which the individual undertakes to perform work or services personally for someone else (unless the individual is working on a genuinely self-employed basis for a client or customer).

Careful consideration needs to be given especially to directors of personal service companies to ensure the correct tax treatment is in place whilst at the same time complying with employment law and minimum wage legislation.

Source:HM Revenue & Customs| 31-10-2022
Employing someone step by step UK

Employing someone step by step

There are a multitude of rules and regulations that you must be aware of when you employ staff.

HMRC’s guidance (entitled Employ someone: step by step) sets out some important issues to be aware of when taking on a new employee.

This includes the following:

  1. Check your business is ready to employ staff – check whether you need to hire someone on a full time or part time basis.
  2. Recruit someone. This includes advertising the role and interviewing candidates. You must also check that they have the right to work in the UK and you may also need to apply for a DBS check (formerly known as a CRB check) if you are working in a field that requires one, e.g., with vulnerable people or security.
  3. Check if the new employees need to be enrolled into a workplace pension.
  4. Agree a contract and salary. Send details of the job (including terms and conditions) in writing to your employee. You need to give your employee a written statement of employment if you’re employing someone for more than 1 month.
  5. Tell HMRC about your new employee. You can do this up to 4 weeks before you pay your new staff. This process must also be completed by directors of a limited company who employ themselves to work in the company.
Source:HM Revenue & Customs| 03-10-2022