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Welcome…
To June’s Business Companion News.
Moving or Changing Business address?
If you are moving business premises don’t forget to let HMRC and others know promptly. From our experience, inconsistent addresses can cause a lot of extra work. For example HMRC will reject forms that show a different address from their records.
As part of our Business Companion service we will inform the following for you. But you have to let us know first!
– Companies House (for Registered Office, Directors and People with significant control)
– HMRC VAT
– HMRC PAYE
– HMRC Self Assessment
– Pensions Regulator
– Pension Scheme
as well as updating our own records.
And of course, you will need to tell your bank, suppliers, customers etc. And you will need to update business stationery and your website.
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| How to spread your PAYE payments |
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Your business may well be stretched right now, the National Minimum Wage rates rose by over 10% from 1 April (see article below) and other input costs have increased by even more, particularly food and energy. It is tempting to use the amounts deducted from your payroll to pay pressing bills, This article explains the consequences.
Read More |
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Excess Mileage Payments
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Are you paying the National Minimum Wage?
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Petrol and diesel pump prices are high, but the tax-free mileage rates (see table) payable to employees who use their own vehicles on business haven‘t been adjusted for over a decade.
| Vehicle |
Cars and Vans |
Motorcycles |
| First 10,000 miles per year |
45p |
24p |
| Above 10,000 miles per year |
25p |
24p |
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Many employees just can‘t afford to use their own car or motorbike for business journeys if they only get reimbursed at these rates, so some employers pay more. But any excess above the tax-free rate is taxable, and subject to NIC.
If you have paid your employees higher mileage rates than in the table above, you need to treat those excess amounts as extra salary and put them through the payroll. You also need to communicate this treatment to the affected employees.
Where the employee‘s own car is purely electric you can still pay up to the rates in the above table for business journeys, tax and NIC-free.
Where the employee charges their private electric car at a charging point at work for free, there is no taxable benefit for the employee on using that electricity. Things get more complicated if you reimburse your employee for the cost of charging their private electric car at their home, or at a road-side charging point.
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This week over 200 employers have been named by government for failing to pay their lowest paid staff the minimum wage. These include WH Smith, M&S and Argos.
The National Minimum Wage rate (NMW) is a legally-enforced standard that ensures employees are paid what they deserve. It was introduced in the UK in 1999.
All sizes of company and almost all types of work are subject to this law, and any business found to be paying under the minimum wage could face severe repercussions.
What is the UK minimum wage?
The NMW increases on a regular basis to keep income in line with inflation. The table below shows the current rates, in effect from April 2023.
| Age Range |
25 years & over |
21-24 years old |
18-20 years old |
16 & 17 years old |
Apprent-ice rate
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| £/hour |
10.42 |
10.18 |
7.49 |
5.28 |
5.28 |
The NMW applies to foreign workers, people who work from home, trainees, and agency workers.
However, these figures do not apply for company directors, members of the armed forces, or self-employed people.
The ‘National Living Wage’ (NLW) is the same as the National Minimum Wage (NMW) for those aged 23 or over. It’s important not to confuse the NLW with the Living Wage. The fundamental difference is that the National Living Wage is a compulsory statutory requirement, whereas the Living Wage is a charity campaign and it’s not legally enforceable.
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Our tax system is complicated. The tax rates that we are all familiar with are 20% and 40%. Additional rate tax at 45% is suffered by a few.
But do we ever think about the effect of your National Insurance? We might ignore Student Loan and Marriage Allowance, but what about Child Benefit? Many have vaguely heard about Dividend Tax (8.75%/ 33.75%) but what about Employer National Insurance (13.8%)? These rates multiply on top of each other.
Then if you are an employer do you ever think about Employer National Insurance 13.8%, the employer Pension contribution and Corporation Tax relief (say 19%)? We assume 8% of Banded Qualifying Earnings (BQE) with the Employer pays all of the pension contributions.
The final column factors all these components of the cost of salary together.
| Wage band |
Employee Tax & NI liabilities 2023/24 |
Composition |
Employer Liabilities |
Composition |
Cost of getting £1,000 take home pay to the employee |
| £0 – £6,240 |
0% |
None |
-19% |
Corp Tax -19% |
£810 |
| £6,241 – £9,096 |
0% |
None |
-12.5% |
Corp Tax -19% Pension 8% BQE
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£875 |
| £9,097 – £12,570 |
0% |
None |
-1.3% |
Corp Tax -19% EER NI 13.8%, Pension 8% BQE |
£987 |
| £12,571 – £13,826 |
2% |
Tax 20%, NI 2% |
-1.3% |
Corp Tax -19% EER NI 13.8%, Pension 8% BQE |
£1,007 |
| £13,827 – £50,000 |
32% |
Tax 20%, NI 12% |
-1.3% |
Corp Tax -19% EER NI 13.8%, Pension 8% BQE
|
£1,451 |
| £50,001 – £50,270 |
50.85% |
Tax 20%, NI 12%, CB 18.85% |
-1.3% |
EER NI 13.8%, Pension 8% BQE. |
£2,007 |
| £50,272 – £60,000 |
60.85% |
Tax 40%, NI 2%, CB 18.85% |
-7.8% |
Corp Tax -19% EER NI 13.8% |
£2,354 |
| £60,001 – £100,000 |
42% |
Tax 40%, NI 2% |
-7.8% |
Corp Tax -19%, EER NI 13.8% |
£1,589 |
| £100,001 – £125,140 |
62% |
Tax 60%, NI 2% |
-7.8% |
Corp Tax -19% EER NI 13.8% |
£2,425 |
| Above £125,140 |
47% |
Tax 45%, NI 2% |
-7.8% |
Corp Tax -19% EER NI 13.8% |
£1,739 |
We normally advise that owner-managed company directors pay themselves a small salary of £12,570 and then dividends beyond this. The tax rates are still confusing:
| Wage Dividend Band |
Tax & NI liabilities 2023/24 |
Composition |
Effective rate |
Cost of getting
£1,000 take home pay to the employee |
| £0 – £12,570 (wages) |
0% |
None |
0% |
£873 |
| £12,571 – £13,826 |
8.75% |
Dividend Tax |
8.75% |
£1,095 |
| £13,827 – £50,000 |
33.75% |
Dividend Tax |
33.75% |
£1,509 |
| £50,001 – £100,000 |
39.35% |
Dividend Tax |
39.35% |
£1,649 |
| £100,001 – £125,140 |
62% |
Tax 60%, NI 2% |
59.02% |
£2,441 |
| Above £125,140 |
47% |
Tax 45%, NI 2% |
39.35% |
£1,649 |
Conclusion
– Try not to employ people on salaries between £50,272 and £60,000; nor between £100,001 and £125,140.
– Think about other benefits that don’t attract so much tax on the employer.
– Give your staff shares and dividends, particularly for those earning over £50,000.
– Note the sweet spots for salaries are £12,570, £49,000 and £99,000. |
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| June Questions and Answers |
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 Q1. I have just received a bonus payment of £100 from the Nationwide Building Society. Do I need to pay tax on this? Answer
Q2. My company regularly pays expenses on my behalf which I later reimburse the company for, I have a variable outstanding debt with the company during the year. I‘ve read that if the total of that debt exceeds £10,000 at any point the company has to pay NIC at 13.8% on the entire amount. Is that correct? Answer
Q3. An employee has been on maternity leave for several months and as a small company I have reclaimed the statutory maternity pay (SMP), but HMRC hasn‘t repaid this amount in full. Why could this be? Answer |
 15 – US expatriates must file their 2022 US federal tax returns by this date if they have not obtained a filing extension. If more time is needed an extension can be obtained to 15 October 2023. Interest will accrue from 15 April 2023 on any tax due, until it is paid.
22 – Employers must pay over PAYE, NIC and CIS deductions made for the month to 5 June 2023, so the money clears the HMRC bank account by this date. |
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 Please contact us if we can help you with these or any other tax or accounts matters.
In addition, if there’s anyone else who you think would benefit from the newsletter, please forward the email to them or ask them to contact us to be added to the newsletter list. |
 If you are not already a client and are interested in becoming one, we would love to discuss how we can help and provide you with a competitive quote for our services.
See details of our Business Companion Service. |
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Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Ledger One, Solar Accounts, Quickbooks, Xero or Clearbooks.
‘All clients using these software packages can benefit from our support. Visit our website https://www.simpleaccounting.co.uk for a look at the resource on offer.’ |
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