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contact@balloonaccounting.co.uk
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Tax FAQ’s

with you on the journey to a brighter future

Here you will find some answers to the questions we are often asked.

We have popped these into categories to make them easier to find. Click on the category to get going.

Employers

Student Loans are part of the Government’s financial support package for students in higher education in the UK.

They are available to help students meet their living costs while they are studying and there are two main types of student loan.

Fixed – term repayment loans (old – style loans).

These loans were available to students commencing a course of higher education up to and including the academic year 1997-98 and are often known as ‘fixed – term repayment’ or ‘mortgage – style’ loans. Repayments are made directly to the Student Loans Company (SLC).

Income – Contingent Loans (new – style loans).

These loans replaced the fixed – term repayment loans and became available to students commencing a course of higher education from the academic year 1998-99. It is HMRC’s responsibility to collect repayments where the borrower is working in the UK. The SLC is responsible for collecting the loans of borrowers outside the UK tax system.

There is an annual threshold below which repayments are not due. If the borrower’s income is above the threshold, repayments will be made according to the level of income.

There are two main types of loan known as ‘Plan 1’ and ‘Plan 2’.

Repayments are deducted at a rate of 9% of income over the threshold, although each plan has a different threshold.

In April 2019, a new loan for England and Wales known as Postgraduate Loan (PGL) was introduced.

There are separate thresholds and rates for these loans which are:

2017/18

Plan 1 – £17,775
Plan 2 – £21,000

2018/19

Plan 1 – £18,330
Plan 2 – £25,000

If you are employed then your employer will collect these sums and they will be reported on your P60. If you are self employed then you MUST tell me about the Student Loan and Plan so that I can calculate the liability. 

Please contact us for further information.

Disclaimer:  This App and its contents have been produced as a helpful reference point. The information should be used as a guide only and your specific circumstances are best discussed directly with us.

No reliance should be placed on this material and no action should be taken without seeking the appropriate professional or legal advice. Although the authors make reasonable efforts to ensure the content of this App is accurate and up-to-date, the authors make no representations, warranties or guarantees that the content is accurate, complete or up-to-date and accept no responsibility whatsoever for any loss occasioned by anyone acting on information within this App.

Categories: Employers, General

The cost of a staff party or other entertainment event such as a Summer BBQ is generally allowed as a deduction for tax purposes. If you meet the various criteria outlined below there is no requirement to report anything to HMRC or pay tax and National Insurance.

There will also be no taxable benefit charged to employees on:

  • An annual Christmas party or other annual event offered to staff generally and is not taxable on those attending provided that the average cost per head of the function does not exceed £150.
  • Provided the event must be open to all employees.
  • If a business has multiple locations, then a party open to all staff at one of the locations is allowable.
  • You can also have separate parties for separate departments, but employees must be able to attend one of the events.
  • There can be more than one annual event. If the total cost of these parties is under £150 per head, then there is no chargeable benefit. However, if the total cost per head goes over £150 then whichever functions best utilise the £150 are exempt and the others taxable.
  • Note, the £150 is not an allowance and any costs over £150 per head are taxable on the full cost per head. It is not necessary to keep a running total by employee but a cost per head per function.
  • All costs including VAT must be taken into account. This includes the costs of transport to and from the event, food and drink and any accommodation provided.

It is highly recommended when planning a staff party or other annual event to try and stick to the tax rules above. This should ensure that your party does not have an extra tax cost for you or your employees.

If you need help in crunching the numbers to make sure you do not exceed the allowable limits, please call me.

Disclaimer:  This App and its contents have been produced as a helpful reference point.  The information should be used as a guide only and your specific circumstances are best discussed directly with us. 

No reliance should be placed on this material and no action should be taken without seeking the appropriate professional or legal advice. Although the authors make reasonable efforts to ensure the content of this App is accurate and up-to-date, the authors make no representations, warranties or guarantees that the content is accurate, complete or up-to-date and accept no responsibility whatsoever for any loss occasioned by anyone acting on information within this App.

There are late filing penalties in place for employers that don’t report payroll information on time. The size of the late filing penalties depends on the number of employees within the PAYE scheme.

Number of employees Monthly penalty per PAYE scheme
1 to 9£100
10 to 49£200
50 to 249£300
250 or more£400

Payments that are over 3 months late can be subject to an additional penalty of 5%.

HMRC has confirmed that having reviewed the effectiveness of the risk-based approach to late filing PAYE penalties, they have decided to continue with their same approach as for the 2019-20 tax year. This means that late filing penalties will continue to be reviewed on a risk-assessed basis, rather than being issued automatically.

The first penalties for 2019-20 will be issued in September 2019.This approach means, that penalties will not be charged automatically if Full Payment Submissions (FPSs) are filed late but within 3 days of the payment date and there is no pattern of persistent late-filing.

This is not an extension to the statutory filing date, which remains unchanged, and HMRC has confirmed that employers who persistently file after the statutory filing date, but within three days thereof, will be monitored and may be charged a late filing penalty.

This move confirms that HMRC will continue to focus on penalising those who deliberately and persistently fail to meet statutory deadlines, rather than those who make occasional and genuine errors.

Please contact us for further information 

Disclaimer:  This App and its contents have been produced as a helpful reference point.  The information should be used as a guide only and your specific circumstances are best discussed directly with us.

No reliance should be placed on this material and no action should be taken without seeking the appropriate professional or legal advice. Although the authors make reasonable efforts to ensure the content of this App is accurate and up to date, the authors make no representations, warranties or guarantees that the content is accurate, complete or up-to-date and accept no responsibility whatsoever for any loss occasioned by anyone acting on information within this App.

Category: Employers

Almost all full time workers in the UK are legally entitled to 5.6 weeks (28 days) paid holiday per year.

This is known as statutory leave entitlement or annual leave.

Legally, employers can include bank holidays as part of statutory leave, although not all employers do this. Employers are also free to provide additional non statutory holiday entitlement.

An employee’s actual statutory entitlement depends on how many days they work per week, but all employees including part-time, agency or casual workers are entitled to holiday.

There is no statutory entitlement to holidays for the self-employed and there are special rules for those in the armed forces, police and civil protection services.

Part-time workers are entitled to a pro-rata entitlement. For example, 5.6 days holiday per year if they work one day a week.

Employees who work irregular days or hours or that are in the first year of a new job can use HMRC’s holiday entitlement calculator to work out how many days they are entitled to.

HMRC is clear that workers have the right to:

  • get paid for leave;
  • build up holiday entitlement during maternity, paternity and adoption leave;
  • build up holiday entitlement while off work sick;
  • request holiday at the same time as sick leave.

Any employee that has a problem with their holiday pay should try and resolve the issue with their employer.

If this does not work, there are a number of ways to resolve the dispute including contacting ACAS or taking the employer to an employment tribunal.

Please contact us for further information. 

Disclaimer:  This App and its contents have been produced as a helpful reference point.  The information should be used as a guide only and your specific circumstances are best discussed directly with us. 

No reliance should be placed on this material and no action should be taken without seeking the appropriate professional or legal advice. Although the authors make reasonable efforts to ensure the content of this App is accurate and up-to-date, the authors make no representations, warranties or guarantees that the content is accurate, complete or up-to-date and accept no responsibility whatsoever for any loss occasioned by anyone acting on information within this App.

Category: Employers

Payroll – how to deal with new starters ?

From a payroll perspective, there are various tasks that an employer has to perform when they take on a new starter.For 2019/20 an employer needs to operate PAYE where the employee earns more than £118 per week (the lower earnings limit for National Insurance purposes). However, if any employees earn more than £118 per week, the employer must comply with RTI and report all payments to employees to HMRC (even those below £118 per week).

Work out what tax code to use

The tax code is fundamental to the operation of PAYE and it is important that the correct tax code is used. To ensure that a new employee is taxed correctly, the employer will need to know the correct tax code to use. If the employee has a P45 and left their last job in the current tax year, the employer can simply use the code shown on the P45.

If the employee left their last job in the 2018/19 tax year, the code on the P45 can be updated by adding 65 to codes ending in L, 59 for codes ending in N and 71 for codes ending in M.If the employee does not have a P45, the employer will need to ask the employee to complete a new starter checklist.

New starter checklist

The new starter checklist enables the employer to gather information on the new employee. Even if the employee has a P45, it is still useful for the new starter to complete the checklist as it contains information which cannot be gleaned from the P45 (such as the type of loan where the new starter has a student loan which has not been repaid). As far as establishing which tax code to use, the employee will need to select one of three statements:

A: ‘This is my first job since 6 April and I have not been receiving taxable Jobseeker’s Allowance, Employment and Support Allowance, taxable Incapacity Benefit, State or Occupational Pension’.

B: ‘This is now my only job but since 6 April I have has another job or received taxable Jobseeker’s Allowance, Employment and Support Allowance or taxable Incapacity Benefit. I do not receive a State or Occupational Pension.

C: ‘As well as my new job, I have another job or receive a State or Occupational Pension’.

The following indicates what code should be used for 2019/20 depending on what statement the employee has ticked.

Statement A ticked: Tax code to use1250L on a cumulative basis

Statement B ticked: Tax code 1250L on a Week 1/Month 1 basis

Statement C ticked: Tax code BR

Does the employee have a student loan?

The employer will also need to establish whether the employee is making student loan repayments. If the employee has a P45 and is making loan repayments, the student loan box will be ticked. However, the P45 will not provide details of the type of loan. Student loan information can be provided on the new starter checklist, enabling the employer to ascertain whether the employee has a student loan, and if so what type, and also whether the employee has a post-graduate loan.

Tell HMRC about the new employee

The employer will need to add the new employee to the payroll and also tell HMRC that the employee is now working for the employer. This is done by including the new starter details on the Full Payment Submission (FPS) the first time that the employee is paid.

Please contact us for further information. 

Disclaimer:  This App and its contents have been produced as a helpful reference point.  The information should be used as a guide only and your specific circumstances are best discussed directly with us. 

No reliance should be placed on this material and no action should be taken without seeking the appropriate professional or legal advice. Although the authors make reasonable efforts to ensure the content of this App is accurate and up-to-date, the authors make no representations, warranties or guarantees that the content is accurate, complete or up-to-date and accept no responsibility whatsoever for any loss occasioned by anyone acting on information within this App.

Category: Employers

A person who provides work to an individual is responsible for correctly establishing the employment status of the worker.  For tax and National Insurance contribution (NIC) purposes that is whether the worker is an employee or self-employed.

Why employment status matters

An individual’s employment status affects the amount of tax and NICs they pay, how they pay them, their employment rights, and if applicable their employer’s responsibilities.

EmploymentstatusMethod of paymentEmployment rights
EmployeeThe employer deducts tax and NICs at source from the employee’s pay under the Pay As You Earn (PAYE) system An employee has a wide range of rights, including entitlement to:·         statutory sick pay;·         maternity/paternity pay; and·         holiday pay.Where necessary, the employer’s disciplinary and grievance procedures apply to an employee, as does the employer’s redundancy policy
Self-employedSelf-employed individuals are normally exempt from PAYE and instead report and pay tax and NICs personally through the self-assessment tax systemA self-employed individual does not have the rights of an employee, for example they are not entitled to holiday or sick pay

If an employer incorrectly treats an employee as self-employed, it can cost the employer (or sometimes the employee) a lot of money to put things right. 

An individual can have one employment status for tax and NICs purposes and a different one for employment law purposes. For example, taxi drivers in the gig economy may be self-employed for tax and NICs purposes but a ‘worker’ for employment law purposes and as such entitled to some employment rights. 

Establishing an individual’s employment status

There is no comprehensive definition in law to say whether an individual is an employee or self-employed. An individual’s employment status is established by weighing up all relevant facts and looking at the overall picture. The factors to be considered are derived from case law.

To emphasise, self employment is a matter of FACT NOT CHOICE

Summary of key factors to be considered:

For employmentAgainst employment
There is an employment contract  There is no employment contract
The engager controls the way the work is doneThe worker controls how they do the work
The worker must do the work themselvesThe worker can send someone else to do the work on terms of their own choice and pay them out of their own pocket
The worker does not bear the losses nor keep the profitsThe worker bears the losses and keeps the profits
The worker does not correct unsatisfactory work in their own time and at their own expenseThe worker corrects unsatisfactory work in their own time and at their own expense
The engager decides where the worker must workThe worker decides where to work
The worker is paid a regular salary by the engagerThe worker invoices the engager for work done
The worker receives benefits in kindThe worker is only paid in cash, cheque or bank transfer
The engager provides the tools and equipmentThe worker provides their own tools and equipment
The engager lays down regular and defined working hoursThe worker decides when they want to work
The engager cannot withhold paymentThe engager can withhold payment until the work is done as agreed
The engager can dismiss the workerThe engager cannot dismiss the worker or cancel the work once the work is agreed, without compensation
The worker works for one engager at a time or a few regular jobsThe worker has lots of engagers at the same time
The engager and worker understand the relationship to be that of employer and employeeThe engager and worker understand the worker to be self-employed
The worker does not risk their own moneyThe worker risks their own money in the business
  • “worker” refers to the person who does the work (not a “worker” for employment right purposes): and
  • “engager” refers to the person for whom the work is done (this could be the individual’s employer)

Please contact us for further information

Disclaimer:  This App and its contents have been produced as a helpful reference point.  The information should be used as a guide only and your specific circumstances are best discussed directly with us.

No reliance should be placed on this material and no action should be taken without seeking the appropriate professional or legal advice. Although the authors make reasonable efforts to ensure the content of this App is accurate and up to date, the authors make no representations, warranties or guarantees that the content is accurate, complete or up-to-date and accept no responsibility whatsoever for any loss occasioned by anyone acting on information within this App.

Category: Employers

General

Student Loans are part of the Government’s financial support package for students in higher education in the UK.

They are available to help students meet their living costs while they are studying and there are two main types of student loan.

Fixed – term repayment loans (old – style loans).

These loans were available to students commencing a course of higher education up to and including the academic year 1997-98 and are often known as ‘fixed – term repayment’ or ‘mortgage – style’ loans. Repayments are made directly to the Student Loans Company (SLC).

Income – Contingent Loans (new – style loans).

These loans replaced the fixed – term repayment loans and became available to students commencing a course of higher education from the academic year 1998-99. It is HMRC’s responsibility to collect repayments where the borrower is working in the UK. The SLC is responsible for collecting the loans of borrowers outside the UK tax system.

There is an annual threshold below which repayments are not due. If the borrower’s income is above the threshold, repayments will be made according to the level of income.

There are two main types of loan known as ‘Plan 1’ and ‘Plan 2’.

Repayments are deducted at a rate of 9% of income over the threshold, although each plan has a different threshold.

In April 2019, a new loan for England and Wales known as Postgraduate Loan (PGL) was introduced.

There are separate thresholds and rates for these loans which are:

2017/18

Plan 1 – £17,775
Plan 2 – £21,000

2018/19

Plan 1 – £18,330
Plan 2 – £25,000

If you are employed then your employer will collect these sums and they will be reported on your P60. If you are self employed then you MUST tell me about the Student Loan and Plan so that I can calculate the liability. 

Please contact us for further information.

Disclaimer:  This App and its contents have been produced as a helpful reference point. The information should be used as a guide only and your specific circumstances are best discussed directly with us.

No reliance should be placed on this material and no action should be taken without seeking the appropriate professional or legal advice. Although the authors make reasonable efforts to ensure the content of this App is accurate and up-to-date, the authors make no representations, warranties or guarantees that the content is accurate, complete or up-to-date and accept no responsibility whatsoever for any loss occasioned by anyone acting on information within this App.

Categories: Employers, General

Limited Company

The cost of a staff party or other entertainment event such as a Summer BBQ is generally allowed as a deduction for tax purposes. If you meet the various criteria outlined below there is no requirement to report anything to HMRC or pay tax and National Insurance.

There will also be no taxable benefit charged to employees on:

  • An annual Christmas party or other annual event offered to staff generally and is not taxable on those attending provided that the average cost per head of the function does not exceed £150.
  • Provided the event must be open to all employees.
  • If a business has multiple locations, then a party open to all staff at one of the locations is allowable.
  • You can also have separate parties for separate departments, but employees must be able to attend one of the events.
  • There can be more than one annual event. If the total cost of these parties is under £150 per head, then there is no chargeable benefit. However, if the total cost per head goes over £150 then whichever functions best utilise the £150 are exempt and the others taxable.
  • Note, the £150 is not an allowance and any costs over £150 per head are taxable on the full cost per head. It is not necessary to keep a running total by employee but a cost per head per function.
  • All costs including VAT must be taken into account. This includes the costs of transport to and from the event, food and drink and any accommodation provided.

It is highly recommended when planning a staff party or other annual event to try and stick to the tax rules above. This should ensure that your party does not have an extra tax cost for you or your employees.

If you need help in crunching the numbers to make sure you do not exceed the allowable limits, please call me.

Disclaimer:  This App and its contents have been produced as a helpful reference point.  The information should be used as a guide only and your specific circumstances are best discussed directly with us. 

No reliance should be placed on this material and no action should be taken without seeking the appropriate professional or legal advice. Although the authors make reasonable efforts to ensure the content of this App is accurate and up-to-date, the authors make no representations, warranties or guarantees that the content is accurate, complete or up-to-date and accept no responsibility whatsoever for any loss occasioned by anyone acting on information within this App.

Self Employed

The cost of a staff party or other entertainment event such as a Summer BBQ is generally allowed as a deduction for tax purposes. If you meet the various criteria outlined below there is no requirement to report anything to HMRC or pay tax and National Insurance.

There will also be no taxable benefit charged to employees on:

  • An annual Christmas party or other annual event offered to staff generally and is not taxable on those attending provided that the average cost per head of the function does not exceed £150.
  • Provided the event must be open to all employees.
  • If a business has multiple locations, then a party open to all staff at one of the locations is allowable.
  • You can also have separate parties for separate departments, but employees must be able to attend one of the events.
  • There can be more than one annual event. If the total cost of these parties is under £150 per head, then there is no chargeable benefit. However, if the total cost per head goes over £150 then whichever functions best utilise the £150 are exempt and the others taxable.
  • Note, the £150 is not an allowance and any costs over £150 per head are taxable on the full cost per head. It is not necessary to keep a running total by employee but a cost per head per function.
  • All costs including VAT must be taken into account. This includes the costs of transport to and from the event, food and drink and any accommodation provided.

It is highly recommended when planning a staff party or other annual event to try and stick to the tax rules above. This should ensure that your party does not have an extra tax cost for you or your employees.

If you need help in crunching the numbers to make sure you do not exceed the allowable limits, please call me.

Disclaimer:  This App and its contents have been produced as a helpful reference point.  The information should be used as a guide only and your specific circumstances are best discussed directly with us. 

No reliance should be placed on this material and no action should be taken without seeking the appropriate professional or legal advice. Although the authors make reasonable efforts to ensure the content of this App is accurate and up-to-date, the authors make no representations, warranties or guarantees that the content is accurate, complete or up-to-date and accept no responsibility whatsoever for any loss occasioned by anyone acting on information within this App.

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