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Effective tax planning is essential if you are to minimise your tax bills. Simple tax planning can significantly reduce your tax liabilities.
The self-assessment tax return is an unavoidable burden if you are liable for self-employed tax or have complicated income tax affairs.
Corporation tax is charged on a company's profits. If you trade as a limited company, ensure that paying this tax is as painless as possible.
National Insurance Contributions (NICs) are payable whether you are self-employed or employed by your own company, although different rates apply.
As well as your legal obligations, you’ll want to ensure that payroll is painless and that you use any opportunities to improve your tax-efficiency.
Effective VAT planning aims to ensure that VAT is relatively painless, and that you are reclaiming as much as possible of the VAT you pay.
Capital gains are made when you sell something for more money than you paid for it. As a result, you can be subject to tax. Take professional advice.
Business property taxes apply to businesses with commercial premises.There are two commercial property taxes: business rates and stamp duty land tax.
If you have tax problems or face a tax investigation, it pays to seek professional advice and you must act rather than just hoping for the best.
Employers pay National Insurance contributions on their employees' earnings and benefits. They are also responsible for collecting employees' Class 1 National Insurance contributions and income tax deductions through the PAYE system.
Employers pay 'secondary' Class 1 National Insurance contributions on their employees' earnings. 'Primary' Class 1 National Insurance contributions are an employee National Insurance contribution (also collected through PAYE).
The amount of Class 1 National Insurance payable depends on employees' earnings and National Insurance category letter. The standard rate of employer's Class 1 National Insurance is 13.8% and is now applicable to employees that had previously opted out of the state second pension. It is no longer possible for employees to opt out of the state second pension and the NI rebate has been removed for those employees.
Employers can benefit from the employment allowance which reduces the amount of employer NICs payable up to the allowance limit (£3,000 per year from April 2016).
NI Rates:
Employer's National Insurance contributions are also payable on some employee benefits. The way these contributions are handled depends on the specific benefits being provided:
The detailed treatment of employer's National Insurance contributions is complicated. Most employers use payroll software or a payroll service to handle this.
Note: the PAYE system has changed. Almost all businesses are required to report PAYE information in real time.
Dispensations to cover employee expenses and benefits were abolished on 6 April 2016. Employees can no longer claim a deduction for expenses reimbursed by employers. Instead, reimbursed expenses are treated as exempt from tax and NICs (providing they are costs that have actually been incurred by the employee). For example, expenses incurred for work-related travel and subsistence, subscriptions and fees or business entertainment expenses. Such expenses are also exempt from HMRC reporting requirements.
Where the expense or benefit is not allowable, or is provided under a salary sacrifice scheme, it must be reported to HMRC on form P11D.
To simplify reporting, employers can now use 'scale rates' or flat rates to reimburse employees instead of the actual costs incurred. Scale rates include rates such as HMRC-approved fuel advisory rates and rates agreed in writing by HMRC. You can apply for a bespoke scale rate approval notice for expenses and benefits on the GOV.UK website.
Expenses and benefits reimbursed using approved scale rates do not need to be reported to HMRC. Approval notices must be renewed every five years.
Dispensations agreed with HMRC between April 2011 and April 2016 can be imported to an approval notice. Dispensations agreed prior to this date will require a new application if the employer wishes to obtain an approval notice.
There is also an exemption for certain 'trivial benefits' costing less than £50 each, subject to an annual limit of £300 per employee per year. Separately, employer's National Insurance contributions can be simplified by negotiating a payroll settlement agreement with HMRC.
A settlement agreement can cover expenses and benefits which are minor, irregular or which are difficult to handle through PAYE (for example, where employees share a benefit). Some items such as cash payments or regular large benefits cannot be included.
Once you have agreed a payroll settlement agreement, you can make a single Class 1B employer National Insurance contribution based on the total value of all the benefits covered by the agreement and the tax due on them.