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Business Companion Newsletter June 2025
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Welcome to our Newsletter for June 2025.

Tax Deadlines coming up

  • Payments of Class 1A NI on P11Ds (Benefits in Kind) are due by 22nd July – see article below.
  • For those on Self Assessment, remember that your second Payments On Account (if applicable) will be due by 31st July.  
     

June 2025

• Reporting and Paying Tax on Benefits in Kind (P11Ds)

• Small Employers’ Relief

• Childcare Costs – don’t miss out!

• Further relaxation of self-assessment thresholds announced

• How to estimate net pay versus salary cost

Reporting and Paying Tax on Benefits in Kind (P11Ds)


Employers
As an employer, you must report taxable benefits you provide to your employees to HMRC. Such benefits could include use of a company car, gym membership or private medical insurance for example. Sometimes offering benefits in this way becomes very expensive for the employer (Class 1A NI due) and employee (income tax).  It might be worth considering offering your employees tax free alternatives such as (for example) occupational training/education or regular medical health checks – both of which are tax allowable and do not need to be reported. Our website includes a list of Tax-free Benefits.  Ask us for advice if you are not sure. 

Currently (2025-26 tax year) taxable benefits can be reported online at the end of the tax year. To report online you need to complete a P11D for each employee you’ve provided with taxable benefits by 6 July. The P11D system allows HMRC to collect the tax due from the employees via their tax code each payroll period. Our current recommendation is that employers should not move away from the online P11D system. 

Paying Class 1A National Insurance
You (as employer) will also need to pay Class 1A National Insurance on these expenses and benefits by 22nd July. Details of payments due are included on a separate P11D(b) form. You need to pay the class 1A NIC for the P11Ds for  Details of what to pay are shown on the P11D(b) form.  The Class 1A NIC due is calculated as 13.8% of the benefit to the employee (2024/25). This rises to 15% in 2025/26. 

HMRC Payment Details: 
Sort Code: 08 32 10
Account Number: 12001039
Account Name: HMRC Cumbernauld
Your payment reference number will be your accounts office reference followed by 2513 (for the 2024-25 tax year) making a 17 digit reference. 

Changes from April 2026 
From April 2026, HMRC will require that most taxable benefits will have to be reported by payroll – not at the end of the year. So some Employers will not need to submit P11D nor P11D(b)s by July 6th 2027.  Instead the employee will pay extra tax and the employer will pay class 1A NI on the benefit throughout the year. Note exceptions such as employment related loans and accommodation; these will continue being reported via a P11D and P11D(b). 

Small Employers’ Relief


Small employers can usually recover 100% of most of the statutory payments they make to employees plus compensation from HMRC.
If your business qualifies for small employers’ relief you could claim 103% of almost all statutory payments made to employees until 5th April 2025. From 6th April this was increased to 108.5% in line with changes to employer’s national insurance.

The payments covered by the relief include statutory maternity; paternity; adoption; parental bereavement; neonatal care (from April 2025); and shared parental leave pay. The relief does not apply to statutory sick pay.

An employer is eligible for small employers’ relief if the total Class 1 national insurance contributions paid by the business in the last complete tax year were £45,000 or less before any reductions such as the employment allowance. Employers that do not qualify can usually claim relief at a lower rate of 92%.

Relief is generally claimed on a monthly basis through payroll software using the employer payment summary and can be offset against other tax liabilities. It is possible to make a claim to HMRC for payment in advance if an employer is unable to meet the cost of statutory payments to its employees.

If you have made statutory payments other than sick pay to employees, we can help you ensure that you are claiming the full amount of compensation you are entitled to.

Childcare costs – don’t miss out!


Tax-free childcare
Many working families will now be arranging childcare for the school summer holidays and the start and end of the school day from September. The Government’s tax-free childcare scheme could provide up to £2,000 a year per child, or £4,000 if the child is disabled, towards the cost of wraparound childcare and holiday clubs.

For every £8 deposited in a tax-free childcare account the Government will top it up by £2 up to a maximum of £500 (or £1,000 if the child is disabled) every three months.

To qualify for the scheme the parent and their partner (if they have one) must earn, or expect to earn, at least the national minimum wage or living wage for 16 hours a week on average; each earn no more than £100,000 per annum; and must not receive universal credit or childcare vouchers.
Parents can use the scheme to pay for childcare for children aged 11 or under, or up to 16 if the child has a disability.
    
For more detailed advice about your particular situation just contact us.

Further relaxation of self-assessment thresholds announced


The criteria for the requirement for self-assessment varies between different types of taxpayer. Previously, self-employed traders have enjoyed a turnover threshold of £1,000 with no requirement to register. HMRC has previously announced that the gross income threshold at which sole traders need to complete a tax return will increase from £1,000 to £3,000 before the end of 2029. Until now, it was unclear whether this would apply to other taxpayers.

The government has now confirmed that it will also increase the thresholds used to determine whether an individual needs to complete a self-assessment tax return at gross income of £3,000 for:
•    property income (currently £2,500 profit or £10,000 gross income); and
•    other taxable income (currently £2,500).

Note. The threshold only applies to the reporting of income, and some affected individuals will still have an income tax liability. HMRC intends to launch a simple online service to collect the tax and will be providing further details on this later in the year.

Article reproduced from indicator-flm.co.uk  

How to estimate net pay versus salary cost


How much would a member of your staff get paid net relative to the cost your business?

Well, this obviously varies according to the tax bands they fall in. Student loans are an extra tax on the young.  It also varies according to your pension scheme, the number of employees and the overall wage bill of your firm.  Here we examine a typical scenario, for a large employer (total salary bill over £80k / more than 2 employees / 8% on employer only pension contributions on banded earnings but no student loans).

In the table below, the ‘Net Pay’ is the actual cash paid to the employee by such an employer.  ‘Empler’ Means the Employer’s cost of the salary plus Employer NI and the pension contribution.  ‘% lost’ means that element of the employer’s cost that has been paid to the Pension scheme and to the HMRC for NI (Employer and Employee) and PAYE;  ‘at the margin’ means the marginal rate of taxation for the earnings that exceed £100k.

£10k  salary – Net Pay £10k – Empler £11k.  10% lost
£20k  salary – Net Pay £18k – Empler £23k.  23% lost  
£30k  salary – Net Pay £26k – Empler £36k.  27% lost  
£40k  salary – Net Pay £32k – Empler £48k.  33% lost  
£50k  salary – Net Pay £40k – Empler £60k.  34% lost  
£60k  salary – Net Pay £45k – Empler £72k.  38% lost   
£70k  salary – Net Pay £50k – Empler £83k.  39% lost  
£80k  salary – Net Pay £56k – Empler £95k.  41% lost  
£90k  salary – Net Pay £62k – Empler £106k.  42% lost  
£100k salary – Net Pay £68k – Empler £118k.  42% lost  
£110k salary – Net Pay £72k – Empler £129k.  45% lost  67% at the margin
£120k salary – Net Pay £75k – Empler £141k.  46% lost  67% at the margin 
£130k salary – Net Pay £80k – Empler £152k.  48% lost  65% at the margin 
£140k salary – Net Pay £85k – Empler £164k.  48% lost  62% at the margin 
£150k salary – Net Pay £91k – Empler £175k.  48% lost  60% at the margin

The key change of rate occurs at £100k.  At £100k the employer is paying £118k.  42% is lost and so the employee gets only £68k.  As you can see the tax rate becomes particularly heavy after a salary exceeds £100k. The following row shows the effect of paying a further £10,000. That following £10k is taxed at 67%.  

This shows how important it is to try to find other means of rewarding senior staff.  Expenses, use of home allowances, share schemes and further employer pension payments would all represent better value for money both for the employee and the employer.  

We have a handy payroll calculator on our website 
Don’t forget that staff receiving state pension do not pay Employee NI and small employers (usually under £80k overall wage bill) do not pay Employer NI as it is covered by Employment Allowance. 
 

Need Help?


Please contact us if we can help you with these or any other tax or accounts matters.

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About Us


Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Solar Accounts, Quickbooks or Xero.

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