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New Childcare Vouchers from Autumn 2015
Childcare vouchers to be withdrawn for new employees
The existing benefits available in the form of childcare vouchers to employees will be withdrawn to new entrants in the Autumn of 2015. The current scheme saves National Insurance contributions for both employers and employees. Employees also save income tax.
English: British National Insurance stamp. (Photo credit: Wikipedia)
New scheme to start in Autumn 2015
The new scheme for childcare vouchers will not be as good for many employees who currently benefit from the current scheme, but where both parents work and are self employed, they can get the government to pay £2,000 towards registered childcare.
How do I set up childcare vouchers?
Childcare vouchers are set up through your payroll scheme and must be available to all eligible employees to receive the tax benefit.
Alterledger can help
For more information on saving employer’s national insurance and preparing for changes to childcare vouchers, contact Alterledger or visit the website alterledger.com.
Related articles
Letters for under 21s
Changes for employees under 21
From 6th April 2015 employer national insurance contributions will be abolished for under 21s. If you employ anyone over 16 and under 21 years old you will need to use one of the new letters for under 21s in the national insurance category setting of your payroll software.
English: British National Insurance stamp. (Photo credit: Wikipedia)
Secondary contribution rates
This table shows how much employers pay towards employees’ National Insurance for tax year 2014 to 2015. The contribution rate calculated by your payroll software is set by the category letter.
| Category letter | £111 to £153
a week |
£153.01 to £770
a week |
£770.01 to £805
a week |
From £805.01
a week |
|---|---|---|---|---|
| A | 0% | 13.8% | 13.8% | 13.8% |
| B | 0% | 13.8% | 13.8% | 13.8% |
| C | 0% | 13.8% | 13.8% | 13.8% |
| D | 3.4% rebate | 10.4% | 13.8% | 13.8% |
| E | 3.4% rebate | 10.4% | 13.8% | 13.8% |
| J | 0% | 13.8% | 13.8% | 13.8% |
| L | 3.4% rebate | 10.4% | 13.8% | 13.8% |
National insurance categories
Most employees will have a category letter of A or D depending on whether or not they are in a contracted-out workplace pension scheme. There are categories for mariners and deep-sea fisherman; the more common categories are shown below:
Employees in a contracted-out workplace pension scheme
| Category letter | Employee group |
|---|---|
| D | All employees apart from those in groups E, C and L in this table |
| E | Married women and widows entitled to pay reduced National Insurance |
| C | Employees over the State Pension age |
| L | Employees who can defer National Insurance because they’re already paying it in another job |
Employees not in contracted-out pension schemes
| Category letter | Employee group |
|---|---|
| A | All employees apart from those in groups B, C and J in this table |
| B | Married women and widows entitled to pay reduced National Insurance |
| C | Employees over the State Pension age |
| J | Employees who can defer National Insurance because they’re already paying it in another job |
Employees in a money-purchase contracted-out scheme
This kind of scheme ended in April 2012 but some employees might still be part of one.
| Category letter | Employee group |
|---|---|
| F | Tax years before 2012 to 2013 only: all employees apart from the ones in groups G, C and S in this table |
| G | Tax years before 2012 to 2013 only: married women and widows entitled to pay reduced National Insurance |
| C | Employees over the State Pension age |
| S | Tax years before 2012 to 2013 only: employees who can defer National Insurance because they’re already paying it in another job |
How to claim zero rate of employer contributions
You should already have proof of age for all your employees. A copy of a passport, driving licence or birth certificate will be required to show that your employee qualifies for the new zero rate of employer’s contribution. The seven new categories are valid from 6th April and must be applied from the first salary payment after 5th April 2015 to benefit from the new zero contribution rate for employers.
What does this have to do with Auto Enrolment?
You need to have proof of age for all your employees aged under 21 to claim the zero contribution rate for employer’s National Insurance. By the time of your staging date you must assess all your workers, based on their earnings and age. To help you prepare for Pension Auto Enrolment you can make sure that all your employee records are up to date and that your payroll software has the full details for all workers including their date of birth. This is a good opportunity to clean up all your employee data.
Alterledger can help
For more information on saving employer’s national insurance and preparing for Pension Auto Enrolment, contact Alterledger or visit the website alterledger.com.
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Say goodbye to small earnings
Say hello to small profits
HMRC has changed the name of the threshold for paying Class 2 National Insurance from the Small Earnings Limit to the Small Profits Threshold. If you earn less than £5,965 in 2015-16 you won’t need to pay Class 2 NI, but if you do, it will be calculated as part of your 2015-16 tax return and due with the rest of your tax by 31st January 2017.
English: British National Insurance stamp. (Photo credit: Wikipedia)
Alterledger can help
For more information on filling in your tax return, contact Alterledger or visit the website alterledger.com to see if you can organise yourself better and cut your tax bill.
Related articles
Self Employed National Insurance
Changes to payment of National Insurance
HMRC has announced changes to the way that the self-employed will pay their Class 2 and Class 4 National Insurance Contributions (NIC). This is not the first time the process has changed. Some people still refer to paying their stamp – in days of old you had to buy special stamps for your NIC!
English: British National Insurance stamp. (Photo credit: Wikipedia)
No new direct debits
Until recently I would have encouraged the self-employed to set up a Direct Debit Instruction (DDI) with HMRC to pay their Class 2 NIC. From April 2015 HMRC will calculate the NIC due from your self-assessment tax return.
Deferment of National Insurance Contributions
If you currently defer NIC, you don’t need to re-apply to do so. HMRC will be sending out letters in December to everyone who currently defers NIC to confirm this. Any new applications to defer NIC will not be processed. For more information on National Insurance for the Self Employed please go to my blog post here: Class 2 NIC.
Alterledger can help
For more information on filling in your tax return, contact Alterledger or visit the website alterledger.com to see if you can organise yourself better and cut your tax bill.
Related articles
Have you paid too much National Insurance?
Unlike Income Tax which is cumulative and assessed across all earnings, National Insurance starts from zero on each individual employment and you also pay National Insurance on Self Employed earnings.
So if you are a Director of multiple businesses paid as an employee its easy to see how you could over pay and you might not even realise because National Insurance is not shown on your Self Assessment Return.
You can also over pay National Insurance if you are a part time employee with multiple employers and irratic earnings, this because National Insurance is calculated on a weekly/monthly basis, not a cumulative basis and its by employer.
What you need to do
Write to HM Revenue and Customs confirming:
- your National Insurance number
- why you’ve overpaid
- the tax year(s) you’ve overpaid
You should include your P60 or a statement from your employer showing the tax and National Insurance for each year you’re claiming for.
You should apply within 6 years of the tax year you’re claiming for.
HM Revenue and Customs
Payment Reconciliation
National Insurance Contributions Office
Benton Park View
Newcastle upon Tyne
NE98 1ZZ
steve@bicknells.net
Karren likes the Employment Allowance – £2000 will be very NIC(E)
This is what Karren Brady said…..
She has a point, £2,000 will be a big help to many SME’s.
The Employment Allowance is available from 6 April 2014. If you are eligible you can reduce your employer Class 1 NICs by up to £2,000 each tax year.
You can claim the Employment Allowance if you are a business or charity (including Community Amateur Sports Clubs) that pays employer Class 1 NICs on your employees’ or directors’ earnings.
If your company belongs to a group of companies or your charity is part of a charities structure, only one company or charity can claim the allowance. It is up to you to decide which company or charity will claim the allowance.
You can only claim the £2,000 Employment Allowance against one PAYE scheme – even if your business runs multiple schemes.
You cannot claim the Employment Allowance, for example if you:
- employ someone for personal, household or domestic work, such as a nanny, au pair, chauffeur, gardener, care support worker
- already claim the allowance through a connected company or charity
- are a public authority, this includes; local, district, town and parish councils
- carry out functions either wholly or mainly of a public nature (unless you have charitable status), for example:
- NHS services
- General Practitioner services
- the managing of housing stock owned by or for a local council
- providing a meals on wheels service for a local council
- refuse collection for a local council
- prison services
- collecting debt for a government department
You do not carry out a function of a public nature, if you are:
- providing security and cleaning services for a public building, such as government or local council offices
- supplying IT services for a government department or local council
Personal and Managed Service Companies who pay contract fees instead of a wage or salary, may not be able to claim the Employment Allowance, as you cannot claim the allowance for any deemed payments of employment income.
Service companies can only claim the allowance, if you pay earnings and have an employer Class 1 NICs liability on these earnings.
You can use your own payroll software (see your software provider’s instructions), or HM Revenue and Customs’ (HMRC’s) Basic PAYE Tools to claim the Employment Allowance.
When you make your claim (using the software of your choice), you must reduce your employer Class 1 NICs payment by an amount of Employment Allowance equal to your employer Class 1 NICs due, but not more than £2,000 per year.
You can read the full guidance here
Will the Employment Allowance be NICE for your business?
steve@bicknells.net
RTI Payroll Year End
Thanks to http://www.freedigitalphotos.net
RTI Payroll Year End
Payroll year end under RTI should now be a much more straightforward affair than in pre-RTI times. Our suggested procedure is as follows.
1. Last FPS submission will be the last payment date (not necessarily payroll date) on or before 05-Apr-14: for monthly paid this will normally be payroll for the month of Mar-14, but for weekly paid it may be less clear.
If for example your pay week ends on a Friday and is paid Wednesday the following week then week ending Friday 28-Mar-14 will be paid Wednesday 02-Apr-14, and this will be your last payroll for 2013-14 tax year; the week ending Friday 04-Apr-14 will be paid on Wednesday 09-Apr-14 which is in 2014-15 tax year (CAERP: users should check the Company Settings ‘Tax & Payroll details’ tab).
2. Make sure you ‘tick the box’ (CAERP: “This is the final FPS submission of the tax year.“) to indicate that this is your last FPS submission for the tax year, and answer the additional questions.
3. If you have made no employee payments and do not therefore need to make a FPS submission then you will need to make an EPS submission as soon as possible after 05-Apr-14 (CAERP: users will find this at the bottom of the P32 report), and tick both the “No payments were made” box and the “This is the final EPS or FPS submission of the tax year.”
HMRC provide further guidance at http://www.hmrc.gov.uk/payerti/end-of-year/tasks.htm
4. Run your P60 reports and forward to all the individuals who have been employed in the 2013-14 tax year.
5. Update the tax codes for those individuals where notices for 2014-15 have been received from HMRC.
6. Update ‘L’ tax codes by adding 56 so that for example ‘944L’ becomes ‘1000L’.
7. Remove any ‘Week 1’ or ‘Month 1’ indicators (CAERP: untick ‘Wk 1 Mth 1 Basis ‘ in employee records).
HMRC provide further guidance at http://www.hmrc.gov.uk/payerti/payroll/year-start.htm
New for tax year 2014-15
8. From 06-Apr14 you will no longer be able to recover a proportion of SSP paid to employees and the NIC holiday arrangements will come to an end.
9. There is however a new employer’s national insurance ‘Employment Allowance’ whereby eligible employers can reduce their Employer Class 1 NICs bill by up to £2,000 per year. Employers who qualify should submit an EPS as soon as possible after 05-May-14 and tick the ‘Employment Allowance Indicator’ box.
HMRC provide further guidance at http://www.hmrc.gov.uk/news/nic-emp-allowance.htm
10. Perhaps the biggest change for the new tax year is that HMRC will be taking a much harder line on late submission of FPS/ EPS returns with automatic penalties, so please be sure that you make a submission at least monthly, even if only a ‘nil’ EPS return.
Paul Driscoll is a Chartered Management Accountant, a director of Central Accounting Limited, Cura Business Consulting Limited, Hudman Limited, and AJ Tensile Fabrications Limited, and is a board level adviser to a variety of other businesses.
No more Class 1NI for Self Employed Entertainers
Following 18 months of extensive engagement with representatives from all fields of the entertainment industry, HMRC published on 15 May 2013 a public consultation document: ‘National Insurance and Self-Employed Entertainers’, which discussed the precise difficulties being caused by the current application of the Regulations. The consultation presented four possible options for simplifying the NICs treatment of entertainers going forwards.
The consultation ran for 12 weeks receiving 11,814 individual responses of which 99.1% supported the option of repealing the Social Security (Categorisation of Earners) Regulations in relation to the entertainers. On 23 October 2013 HMRC published a summary of the consultation responses which included the announcement of the Government’s decision to repeal these Regulations insofar as they relate to entertainers from 6 April 2014 and a first draft of the legislation implementing this.
From 6 April 2014, producers engaging entertainment performance services will not be required to deduct Class 1 NICs contributions from any payments they make to you. This includes additional use payments such as royalties. The engager will make payments to the entertainer gross of tax and NICs and the entertainer must declare these earnings as part of their normal self-employed Self-Assessment return.
Please note that this guidance does not apply if you are an entertainer on an employment contract, and receive a regular salary from your engager with tax and NICs deducted at source under the Pay As You Earn (PAYE) system.
If you engage the services of entertainers
From 6 April 2014, you will not be required to operate Class 1 NICs for the entertainers you engage. If you are currently deducting employees’ Class 1 NICs from the payments you make to your entertainers (including additional use payments such as royalties), and paying the respective employers’ Class 1 NICs on these payments, you should continue to do so up until 5 April 2014. From 6 April 2014 however you should cease to do this.
The changes will be of interest to all national broadcasters, film companies, theatre managers, independent production companies, their representative bodies and agents in the Film & TV Production Industries, Equity, individual entertainers, companies engaging entertainers, and any other interested parties.
See HMRC Brief 35/13 for more details
steve@bicknells.net
Business Accountant 