ASSOCIATION NEWS
ADVICE for our Members If you have any queries about the NIC changes or wish to explore salary sacrifice opportunities in further detail, our specialist Employment Tax team at Azets are on hand to provide support and guidance, please contact at hello@azets.co.uk ON 7 SEPTEMBER, the UK Government announced they will temporarily increase the rates of National Insurance Contributions (NICs) throughout the UK. The rates of class 1 NIC (paid by employees and employers), class 4 NIC (paid by self-employed), and dividend taxes will all increase by 1.25% for the 2022/2023 tax year, effective from April 2022. The voluntary NIC payments, class 2 and class 3, used to top up gaps for state pension purposes, will remain unaffected by the new announcement. The class 1 NIC increase will apply to the employees’ NIC element as well as the secondary employers’ element. For employers, the increase will also apply to: • class 1A NIC on benefits and termination payments exceeding £30,000, and; • class 1B NIC on items included in a PAYE Settlement Agreement (PSA).
NEW HEALTH & SOCIAL CARE LEVY ANNOUNCED WHAT DOES THIS MEAN FOR EMPLOYERS? What does this mean for employers? The increases in class 1 NIC will result in inflated employer costs and will need to be factored into both budgets and forecasts, especially as employment costs are typically a business’ largest expenditure. Employers are still of course recovering from the impact of the pandemic and the subsequent downturn in operations, with further staff cuts likely resulting from the end of the Job Retention Scheme (JRS) on 30 September 2021.This will no doubt add to their burdens. To help mitigate the cost impact of the rising rates, employers may consider adjustments to employee salaries or customer pricing.
Our recommendation If not already in place, Salary Sacrifice schemes would be well-worth considering. Despite the UK Government’s withdrawal of some tax and NIC incentives in April 2017,
some benefits still remain which attract generous tax and NIC reliefs under salary sacrifice arrangements, these being: • Employer pension contributions • Ultra-low emissions cars, with CO2 emissions of up to 75g/km • Equipment under cycle-to-work schemes These areas provide opportunities for significant employer and employee savings and the latest NIC rate increases provides opportunity for further savings. We are seeing an increasing number of businesses use salary sacrifice to optimise the remuneration package leading to improvements in employee attraction and retention. As we move towards seeking more green energy alternatives, ultra-low emissions vehicles provided under a salary sacrifice arrangement are becoming increasingly attractive bearing in mind the low ‘Benefit in Kind’ tax rates applied for such vehicles.
AVOIDING PITFALLS IN YOUR SELF-ASSESSMENT WE ALL KNOW the feeling. The ominous brown envelope lands on the doormat and suddenly you find yourself a few hundred pounds poorer, you owe the taxman for errors in your self-assessment tax return, and it’s time to pay up. Mike Parkes from GoSimpleTax gives some pointers on how to avoid any errors... THIS YEAR’S SELF-assessment will have an added element for many self-employed decorators, as it’s the first time the Covid-19 relief SEISS grants will need to be included. Anyone who received these emergency grants now needs to declare them and be ready to pay tax on the income. So, what can self-employed decorators do now to ensure their self-assessment tax return is free of errors, and avoid that brown HMRC envelope next year?
Go digital
Sweat the small stuff
Look at the benefits
The devil is in the detail. While it’s obviously important that your self-assessment tax return shows your taxable profit accurately, it’s also vital that you go through the detail of the year with a fine toothcomb to uncover any discrepancies or tax-free expenditures, as these may mean the difference between tax brackets and therefore have a potentially considerable impact on the amount payable.
Tax software like ours will also prompt you to consider any tax-free elements to your business expenditure. Things like phone bills, materials procured in the course of business, marketing expenditure and so on can all be considered as part of your business’ tax-free expenditure and therefore you don’t need to pay tax on top of that cost. It’s worth looking at all your expenditures and establishing which fall into this bracket.
Get your classifications right
Think ahead
When completing your 2020/21 tax return, any SEISS grants received in the year ended 5 April 2021 need to be included. However, do not include the grants within your normal turnover figure. HMRC have added a specific box to the 2020/21 tax return for you to add details of any grants received, please be sure to include the grants in this box. If you were to include the grant within your normal turnover figure and leave the new box blank then it is likely HMRC will add your SEISS grants automatically, meaning the grant income is included twice, the result is you will pay tax on the same income twice.
It really does pay to be more organised, and you can save yourself a future headache by tackling your tax head-on as the year goes on. Digital software is one effective and easy way of doing this. Not only do you save yourself time and stress, but you can operate your business with a clear idea of how much profit you’ll have after tax, thus avoiding any nasty surprises. Tax is rarely at the top of anyone’s list of favourite admin jobs, but it’s a really important one. By taking extra care now, you can hopefully avoid that brown envelope landing on your doormat next year.
If you haven’t already embraced digital solutions for tracking your invoicing and expenditure, it’s time to give it some serious consideration. There is plenty of free and paid-for software that make this aspect of running your business much easier, and help with your tax return too. Tools like SimpleTax integrate with many invoicing software platforms and automatically import your transactions, taking the pain out of working out your annual financial picture.
GoSimpleTax software submits directly to HMRC and is the solution for the self-employed, sole traders, and anyone with income outside of PAYE to log all their income and expenses. The software provides hints and tips that could save you money on allowances and expenses you may have missed. PDA Members receive a 30% discount off GoSimpleTax.www.gosimpletax.com/tax-pda/
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