This blog article is for people who wish to find out if they have missing gaps in their qualifying years for state pension and wish to pay voluntary pension contributions to HMRC.
Here are the steps:
Find out if you have missing gaps in your qualifying years for state pension via:
b. Calling Future Pension Centre helpline on 0800 731 0181
This is a free advice service. You will be advised regarding any information you need to know from your account (e.g. how many years you contributed to your state pension, how many years you still need to contribute to qualify for full state pension, if you have any gaps and how to pay for the gaps etc. They also advise whether it is recommended to fill the gaps according to your circumstances)
2. If you wish to pay for any gaps, you need to call HMRC on 0300 200 3500
They will provide you with details of HMRC’s account no, sort code and a 18 digit reference number for the payment. If making an online payment , it may reach in about 24 hours, however it will show in you HMRC account in about 6 weeks. You need to check after 6 weeks to ensure gap is resolved.
Employment allowance in group companies can only be claimed by any one company.
An employer gets £3,000 off their Class 1A (Secondary) National Insurance in each tax year.
The question arises – can two or more companies in a group claim £3,000 each.
The answer is No, only one of the group companies can claim employment allowance. Tax payer decides which company gets it.
I would highly recommend a read through the technical guidance link given below:
a) HMRC even includes unincorporated businesses in connected businesses.
b) Besides share-holding and control as under Corporation Tax Act 2010, HMRC has included within connected businesses – economically interdependent businesses as well.
Technical guidance in this case is highly readable with lots of examples.
PS – I came across this little gem of information among audience questions today on HMRC Webinar: Employers – what’s new for 2018. I will highly recommend subscribing to these webinars. They are free !
October 2019
HMRC’s latest Agent Update Issue 74 informs that from 6 April 2020 Employment Allowance will be restricted to employers with NICs liabilities of under £100,000.
That is employers will need to look at their last tax year’s Employer NIC expense and if its over £100k they cannot claim £3k Employment Allowance.
If employer is part of a group Class 1 NICs liabilities of all companies, and/or PAYE schemes, needs to be added together to assess eligibility for Employment Allowance.
Below is a very brief summary of taxes in the UK but gives an idea to a businessman who is planning to start a business.
Ongoing Taxes
Name
Detail
Rate
Corporation tax
Tax on profit the company makes
Current rate 19% going up to 25% from April 2023 for profits over £250k
Dividend tax
Tax on dividends received by individual shareholders
First £2k tax free then between 7.5% to 38.1%
Payroll (PAYE) tax
Taxes on becoming an employer
Income tax
Employee pays
First £12,570 is tax free then between 20% to 45%.
Employee national insurance
Employee pays
First £8,840 tax free then 12%
Employer national insurance
Employer pays
First 9,568 tax free then 13.8%.
Employment allowance £4k
Value added tax
Sales tax when turnover crosses £85,000
Usually 20%
Business rates
Municipal tax
Usually, half of rent
One off taxes
Name
Detail
Rate
Capital Gains Tax
Tax on the profit when you sell something that is increased in value.
First £12,300 tax free then 10% or 20% depending on your income. Tax on sale of residential property is higher.
Inheritance Tax
Tax on the estate of someone who died.
40% over £325,000
Other matters
Name
Detail
Rate
Insurance
Minimum legal requirement
Employer’s Liability Insurance. Certificate needs to be kept for 40 years. Requirement now removed.
Minimum Wage
Legal minimum wage
Over 23 years: £8.91 per hour. Lower for younger people
Matters specific to restaurant industry.
Name
Detail
Rate
Premises License
Permit to sell alcohol
New license can be a long process. Transfer is usually free and annual fee less than £1k p.a.
Music License
Permit to play background music
Annual fee under £1k p.a.
Example:
Suppose you start a restaurant and after few years it starts making some profits, you will find that you have a new partner to share in your good fortune – Her Majesty’s Revenue and Customs (HMRC)
I have given below what an owner will make and what his new partner HMRC will capture.
Owner’s share: Sales £2,000,000 Net Profits £400,000 say 20% Corporation Tax £100,000 25% rate from April 2023 Distributable Profits £300,000 Personal/Dividend tax £100,000 Net in hand £200,000
I have taken net profits at 20% this is achievable in a well-run high end central London restaurant. This profit percentage is after paying payroll taxes, VAT and Business Rates.
HMRC’s share: Business Rate £100,000 Fixed not dependent on sales VAT £400,000 Payroll Taxes £60,000 Corporation Tax £100,000 Personal/Dividend tax £100,000 Total £760,000
Above figures have been estimated and rounded off to make them easier to understand but on the whole close to reality.
In case you decide sell or just drop dead, you will meet new characters from the `Book of the Taxes` called Capital Gains tax and Inheritance tax but don’t worry, not today.
Step2: If benefits are not exempt, we need to report them to HMRC and deduct tax and NIC but it depends on who pays for the benefit.
Who Pays
Who pays What
Employer arranges and pay directly to insurance company
Employer Class 1A NIC via P11d
Employee – income tax via Self-assessment but pays no NIC.
Employee arranges but employer pays to insurance company
Employer Class 1A via P11d
Employee – income tax via Self-assessment Employee pays NIC via payroll by adding value of benefit to employee’s earning.
Employer reimburses employee
Employer pays Class1A and employee pay Class1 NIC and Tax. All collected via payroll.
Conclusion: Best option is employer to arrange and pay provider directly. Please note cost of insurance and class 1A NIC will be tax deductible for employer as an expense.
No liability to income tax arises if the employer arranges and pays for a `retirement or death benefit`.
Retirement or death benefit – means a pension, annuity, lump sum, gratuity or other similar benefit which will be paid in the event of the employee’s retirement or death.
Thousands of individuals file their tax returns on the first day
The tax year has ended.
Main benefit of submitting tax return as soon as possible is that the enquiry window runs for a full 12 months from the date the tax return is received. So for example a return received by HMRC on 20 June 2018, the enquiry window will run to 20 June 2019 – EM1501
Nottinghill Accountants 