Real Time Information 2013-14
A week tomorrow (Saturday, April 6th) is the start of a new tax year, 2013-14, which means new tax allowances and new NICs (National Insurance contributions) along with Real Time Information (RTI) and a thousand and one other amendments to the tax system. Does anyone really believe the Government is committed to simplifying the tax system? Yesterday’s publication of the Finance Bill (629 pages with a further 552 pages of explanatory notes) is a pretty good indicator of how tax is being simplified!
Fortunately most people, including business owners, can safely ignore the vast majority of the 2013/14 changes, unless you’re an accountant that is! And assuming, if you are in business, that you do have a good accountant who will make sure you don’t fall foul of any of the new rules.
One set of changes, however, which most businesses cannot ignore are the new rules relating to PAYE and NICs. Finding the details isn’t easy but if you want all the information in one place I would recommend HMRC’s PAYE and NICs rates and limits for 2013-14.
Admittedly, it doesn’t include NIC rates for the self employed nor does it tell you the optimum salary to pay yourself if you’re a director of your own company but it’s worth keeping a copy for future reference.
2013-14 is going to be a challenging year for small businesses who operate PAYE. Making sure you have the basic information correct for your employees will make it easier.
And finally, if it all does prove too much, just contact us and we’ll help you solve your problems.
My view before and immediately after the Budget was
SFA for SMEs!
On reflection, I may have been a little harsh.
True, the reduction in corporation tax to 20% will, as mentioned yesterday, make no difference to the vast majority of small businesses, but the announcement of the creation of an “employment allowance” for every company in the country, reducing their total employer national insurance by £2,000 each will benefit more than 450,000 small businesses.
It may even help the typical one man band business where the owner/director takes a small salary (currently about £7,600 per year) to avoid paying National Insurance and then takes dividends to increase his/her income. Unfortunately, unless the director has other taxable income some of the personal allowance (currently £8,105) is wasted. Increasing the salary to £8,105 is of no benefit because both employer’s and employee’s National Insurance have to be paid on the excess, which negates the tax savings.
The introduction of an “employment allowance” will eliminate the employer’s National Insurance and allow the salary to be increased to avoid wasting any of the personal allowance.
The saving will not be huge (probably about £200 when the new measures come into effect) but when nothing else has been given to small businesses, it should probably be gratefully received!
Like so many tax issues, a simple question produces a complicated answer! Rather than follow this route I shall simplify it by introducing the following assumptions:
- The director wants a salary which saves the most tax and National Insurance; but
- Wants to preserve his/her entitlement to state benefits.
To preserve your entitlement to a state pension you need a certain number of qualifying years. In 2013/14 you need to have £5,668 or more of earnings.
Paying yourself a salary of this amount would mean that 2012/13 was a qualifying year and neither you nor your company would pay any tax or National Insurance.
Sadly tax isn’t that easy. If your salary is only £5,668 and you have no other income, you’re wasting £3,772 of your personal allowance. The obvious answer of paying yourself £9,440 isn’t the right answer though because the cost of the extra National Insurance will cancel out the tax savings. Neither is paying yourself £7,690 to avoid paying the National Insurance above the Secondary Threshold.
In this situation, the optimum salary is £7,755 per year (£646 per month) It will cost £8.28 in Employer’s National Insurance but it will save nearly £420 in corporation tax compared to paying the LEL of £5,668.
HMRC has published the National Insurance contributions rates, thresholds and limits for the 2013-14 tax year.
They are draft until they are approved by both Houses of Parliament. It’s highly unlikely that they will change though.
Don’t bother reading them however, because they don’t make a great deal of sense without some background knowledge!
They relate to Class 1 contributions, which are paid by employees. The important points are:
- If your monthly salary is less than £641 per month in 2013-14, neither you nor your employer will pay any contributions.
- When you earn £646 or more per month you will start to pay National Insurance.
Full (and understandable) details of the new rates are available on the Ross Martin Tax Consultancy website.
John Wormall, a local businessman has just been banned from acting as a company director for five years by the Insolvency Service.
Over a period of 13 months he failed to pay more than £450,000 PAYE and NIC to HMRC, which to anyone in business will seem absolutely unbelievable. We act for clients who, if they are a few days late with their monthly payment, receive a phone call from HMRC.
As always when a company fails there are many victims – the employees, the suppliers, the other creditors and we the taxpayers ourselves. Inevitably there are fewer culprits – the directors spring to mind and sometimes the banks. Tempting though it is to blame HMRC , in this case, for allowing the debts to rise I don’t believe it’s their fault.
The real culprit is this government and previous governments for not giving HMRC enough money to do their job properly. It’s painfully obvious to everyone but politicians that money spent on HMRC is an investment not a cost. It should be increased not cut.
Once again the due date for payment of PAYE (if you pay electronically) falls on a Saturday.
This shouldn’t cause any problems if you pay using Faster Payments but, once again I should add, that the ‘helpful’ advice from HMRC will be used against you if you’re late paying.
HMRC are warning us that any P9Ds, P11Ds and P11D(b)s must be submitted to HMRC before 6 July, which can mean only one thing
HMRC will penalise you if the returns are late
HMRC have just sent this e-mail to all employers who have registered for the HMRC Employer e-mail alert service.
If you are an employer and you haven’t registered, you should.
The latest edition of HMRC’s Employer Bulletin, “your route to the latest in payroll news and views”, has just been released.
Although it isn’t essential reading like VAT Updates, if you’re an employer then you should probably look at it. The problem is this edition stretches to 41 pages!
So, in an attempt to keep your attention I have listed what I think is important:
Page 4 Budget Announcements
Page 8 Employer Annual Returns
Page 10 Employer Late Filing Penalties
Page 20 You can now view your PAYE (and VAT) tax position online
Page 30 Student Loans
HMRC have issued a reminder that this month’s PAYE payment is due on April 22 which is a Sunday.
Faster payments have made this less of a problem than it used to be, but the banks have their own rules relating to how the scheme operates.(HSBC has a £10K daily limit).
As HMRC say
you should contact your bank or building society before making each payment and they will confirm whether the service is available for that payment and explain how it works.