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The P60 tax form is an statement that shows your earnings and all statutory deductions during an specific tax year. It is usually issued by 31st March to all employees and it is recommended for employees to keep this form in a safe place as chances of not being able to get a copy in case you lose the original one, are high. This form is useful as proof of earnings for benefits and tax credits, it also provides a great aid when completing a self-assessment tax return.

TAX

PAYE (Pay As You Earn) is the system being used to pay income tax. This tax gets deducted before you receive your monthly salary, this is your employer’s responsibility. They will be in charge of making sure that HMRC receives the employee’s paperwork on time.

You need to pay special attention to your tax code, so if the code is 1000L means that you are entitled to £10,000 tax-free allowances during the current tax year. Some people wrongfully think that it means the threshold to start paying and that can have costly consequences.

BR: This stands for Basic Rate which is (20%) and it means that you’re not receiving any tax-free allowances. The tax form for this is the P45.

0T – This means no allowances. It is used when there’s no notification of a tax code received.

National Insurance

National Insurance contributions are designed to build up towards some social security benefits you are entitled to, such as State Pension. Factors like whether you’re self-employed or not and your income will determine the NIC (National Insurance Contribution ) level. All NIC contributions cease after you reach State Retirement age.

There’s a default letter used for National Insurance is A, and the standard rate is NI. Anyone above State Pension Age should be in category C and no contributions should be paid by this person.

A – Standard Rate NI,  Employees pay 12% and then 2%

C – For employees who have reached state retirement age. No NI is due.

NI Thresholds

There’s a lot of information for the way statutory deductions work, and if you’re just starting your business it may be difficult to cover all basis without risking any issues with HMRC. Make sure that you explore the market if you’re looking for the right professional guidance to help you with complex administrative and accounting tasks or click here to talk with our team of professionals to see if we fit your business needs and requirement

There was a major change recently in the way contributions work and basically, any employee will automatically contribute to a workplace pension, in addition to it, the employer must contribute too. Employees can opt out of the new contribution scheme if they choose to, but keep in mind that the enrolment is automatic every three years.

How does the new contribution scheme work?

This is a new scheme that allows workers to start paying for a workplace pension from your salary, there’s a bonus which is that the employer and government will also be making contributions. The age threshold to access this pension is 55 years old and until the employee reaches that age, the funds will be held by a pension provider.

How much does the employee have to contribute to the workplace pension?

Income is the first determining factor here, so since it’s proportional to income, means that the more you earn, the more you contribute. Currently, auto-enrolment is for people earning a minimum of £10,000.

Keep in mind that even though you and your employer can contribute more if you are above the threshold of £10,000. The employer, however, cannot establish higher rates that make the employee to lose interest in contributing to a workplace pension.

The contribution is made solely by the employer and employee?

No, the government will also contribute to it. The additional deposit from the government is known as tax relief, which means that you get a refund of the tax that the employee originally paid at the usual rate that every employee knows. Employees need to pay attention to this as sometimes the employees would have to claim the tax relief after a self-assessment tax return.

What about salary sacrifice?

Employers can opt to pay pension from the salary before any tax is deducted, this is called “salary sacrifice”. Now, since the contribution is made before tax and NI are deducted off your salary, the government gives you those savings back. This means that a basic taxpayer will receive a 20% income tax, plus 12% from NI contributions back.

Who can access workplace pension: 

Since it’s automatic, chances are that you are already enrolled. The government criteria for this is: any person between 22 and 65 and 63 – 65 for men, 63 for women-, earning more than £10,000 from one work source who is employed in the UK. The self-employed and one-man companies are excluded from this scheme.

If you fall outside this requirements you can also choose to have a workplace pension in the event that your employer offers one and you are 21. Government plans for this scheme include extending age limit starting at 18 years old, as a way to encourage younger persons to care for their pension. None of these possible changes can take place before 2020.

The minimum amount a person has to earn in order to be eligible for this scheme is £5,876/year, however, some government spokespersons have opened up the possibility to entirely remove the lower earnings limit. This would mean that you will be eligible for auto-enrolment regardless of income. This is going to be beneficial for many people that have multiple jobs with earnings below the threshold.

Many decisions are yet to be made regarding this new scheme and that means that the decision-making process for this can be stressful. Don’t be afraid to reach out for financial guidance to make better, well-informed decisions that relate to vital aspects of your adult life, like retirement and pension. Trust our team of professionals who can provide the best guidance so you have all basis covered and enjoy peace of mind.

Payroll is considered one of the biggest tasks that businesses have to deal with, its complexity and all the costly implications resulting from incorrect procedures have turned this process into a headache for many business owners.

Staff

Payroll is a major business process that requires a dedicated staff to complete, but most small businesses usually use unqualified employees to conduct these tasks as an additional function besides their originally assigned responsibilities.

When businesses decide to outsource payroll, they allow its staff to concentrate on their originally assigned tasks, improving efficiency in the workplace. Therefore, having a third party handling a company’s payroll process will allow everyone to focus in their areas of expertise thus making the business grow.

Knowledge

Payroll is more than just paying in time to employees. There are different forms of employment that can lead to complex payroll situations that your “in-house” payroll staff may not be familiar, and have a lack of knowledge with payroll procedures which may result in serious fines and fees from HMRC. An outsourcing payroll services will provide vast knowledge of everything related to payroll, tax law and new government legislation.

Costs

The overall cost to run an internal payroll department can quickly accumulate when it involves a payroll software, equipment, training, printing, distribution, employee wages and the potential fee’s and fines if procedures are not completed adequately. Outsourcing payroll companies offer a cost per an employee to manage a suitable payroll cost and also the professional support to prevent HMRC fines.

Training Staff

Hiring an entire payroll staff may not be a cost-effective solution to all businesses, or maybe the business is not large enough to make it worthy to have a full/time payroll employee. As a result, companies may have to train employees in payroll as an additional task to their usual work roles who will also have to keep themselves updated with new processes and sudden legislation and payroll law changes.

Error-free

Incorrect management of a business’ payroll can result in large fines however having a team of professionals to complete the payroll can ensure high accuracy which will significantly reduce the risks of encountering any payroll errors.

Speed

Handling payroll is a lengthy and stressful process that can take a lot of time to complete even if you have the knowledge. An outsourcing payroll service company will have a good team of skilled payroll specialist that can handle complex payroll processes accurately and in a timely manner.

Reliable

Having a payroll service provider means that there’s a dedicated team of specialists that will deliver consistent and highly accurate payroll results every time. Whereas an in-house payroll employee may encounter problems if an employee gets sick or if its a holiday. Finding a skilled replacement can be hard and may compromise the entire payroll process. However, a payroll company will never have this problem when handling your payroll, so you can rest assured that your payroll process will be carried out no matter what.

Tailored payroll

Most payroll companies offer different packages depending on the company’s needs and size. Most of the time those packages are flexible so you can add or delete services depending on the amount of payroll you want to outsource. This is important so you don’t end up paying for something that you’re not really using.

Security

If business owners have the time to verify every single stage of payroll, making sure that no fraudulent activity takes place, then they should encounter no problem. Sadly, most business owners don’t have time to supervise this and if they do have time, they may lack the correct tools to identify malpractice.

Outsourcing to a payroll service provider will have the latest payroll software technology and also will have the correct methods to detect and block any fraudulent activity in case the company gets attacked by hackers, remember that payroll handles sensitive data.

Outsourcing payroll is a great help for businesses within any industry. However, business owners must do their share of research so they can find an ally that provides professional guidance.