There have been a number of developments during the last year – here is a brief overview of the changes.
The new rates for national insurance have been announced for the tax year starting on 6 April 2011. The earnings threshold is replaced by two thresholds: a primary threshold (PT) for employees and a secondary threshold (ST) for employers. This further complicates the national insurance system, particularly if you operate a contracted out occupational pension scheme.
These changes time in with the increases in rates already announced. The accruals point remains frozen, while the upper earnings limit has reduced. This means that some employees will be paying less national insurance than at present and offers some scope for tax planning.
The lower earnings limit will increase from £97 to £102. This is the threshold at which an employee earns credits for the state retirement pension and is eligible to claim statutory sick pay and other statutory payments. As this increase is more than 5%, it could mean that part-time and low-paid workers could find themselves put outside the scope of these statutory schemes.
If you need help in understanding these changes and their implications, please call us.
Real time information
The government plans to amend the PAYE system by introducing real time information.
This means that every time you run the payroll, you must send in details of how much tax, national insurance you have deducted. There are up to 102 pieces of information that must be sent.
The proposed timetable is:
- January 2013: large employers move to RTI
- April 2013: medium-sized employers move to RTI
- August 2013: small employers move to RTI
- October 2013: every employer has moved to RTI.
This means that in less than three years’ time, even the smallest employer must be submitting data using RTI.
We can make sure that you are ready for this change.
From May 2010, a penalty may be imposed on an employer who is late in submitting a PAYE return or payment. These penalties will not be imposed until after the tax year has ended on 5 April 2011, so you could be incurring penalties without realising it.
There is no penalty for a single “offence”, but thereafter penalties are incurred at 1% of the payroll, increasing to 5% if you are late every month.
We can help you ensure that you do not incur penalties. If you are late for any reason, we may be able to help you if there is “reasonable excuse” for the lateness.
You are allowed to spend up to £150 per person attending a Christmas party or other social occasion.
Please note that:
- the limit is per person, not per employee
- the limit is per person who attends, not those who accept the invitation
- if the limit is breached, the whole cost is taxable, not just the excess
- the limit includes VAT even if you can claim this back as input tax
- party costs include taxis, overnight accommodation and similar expenses
- the limit cannot be used to cover Christmas presents to staff.
Last year some Christmas parties were caught out by unexpected snowfall. This meant that some people could not attend with the consequence that those who did were hit by a tax charge. We can advise on procedures by which the employer can pay this tax.
In the meantime, you may wish to consider having your party in January when hopefully the snow has gone, and everyone is feeling rather fed up having just received their credit card bills. You may also find diaries and restaurants less booked up!
Although not a tax matter, we remind clients that an employer is “vicariously liable” for the conduct of employees at staff parties. If someone drinks too much and causes an accident while driving or gets too friendly with a colleague, the employer could face expensive legal action.
The government has brought forward by two years from 2020 to 2018, the age at which men and women reach state retirement age of 65. This is also the age at which individuals stop paying national insurance. From 2018 to 2020, the common retirement age will increase to 66 for men and women.
This change affects all women born after 5 April 1950 and all men born after 5 April 1953. Some women will find that this latest change defers their state retirement age by up to two years.
We can provide further information and advice.