Benefits in Kind (BIK) cover several different perks or additional employer payments to their employees. They can include any of the following:

• Private Healthcare
• Loans
• Company cars
• Gym memberships
• And much more. 

It is the employer’s responsibility to confirm all above-mentioned taxable benefits are on a P11D form and submitted annually to HM Revenue & Customs (HMRC).

It is worth noting that employers must include certain expenses on the P11D form. However, there are many different types of expenses, each with complicated rules, so it is best to seek advice if you are unsure.

The GOV.UK website also has an extensive list of all expenses if you are unsure and need to double-check.

The deadline for submitting P11D forms for the 2022/23 tax year is 6 July 2023.

Obtaining a P11D form

In previous years, P11D forms could be downloaded and filed by post with HMRC, but any submissions now need to be made through the PAYE online service.

In some instances, employers will have all expenses and benefits taxed through their payroll, so there may be no need to fill in a P11D form.

Missing the deadline and form errors – Do not pay the price

You can incur penalties if you submit your P11D forms beyond the 6 July deadline.

A fine of £100 per 50 employees is issued each month or part month that it is late, with further penalties issued if employers do not resolve matters.

It is also vital that the P11D form is correct, as HMRC can fine employers for any information they find inaccurate.

Therefore, it is best to check P11D forms carefully before submitting them.

Please contact us for any assistance completing or submitting your P11D forms, including queries about BIK.

Student Loans repayments are changing, and employers must prepare.

Currently, graduates and students who have taken out student loans must repay their loan when they earn an annual salary of £27,295 or more, with repayments at a rate of 9% on any income earned above this threshold.

The threshold is then adjusted annually for inflation following the Retail Price Index.

However, starting from the academic year 2023/24, we will see a new student loan plan in place.

Introduced as Plan 5, the changes affect those taking out loans on or after 1 August 2023.

For these students, the threshold is reduced to £25,000 per year, meaning that graduates will begin repaying their loans when they earn more than this amount.

Repayment rates are also 9% on any income earned above this threshold.

Students on Plan 5 will not make their student loan repayment until April 2026 at the earliest, even if they leave their course early.

The repayment period will also be extended from 30 to 40 years, resulting in a longer repayment period for more graduates to repay their loans in full.

If a person’s income falls below £25,000, their repayments will stop and restart when their income exceeds the threshold again.

Student Loan Repayment Bands explained

Depending on when people start their courses, students face different loan repayment bands.

Students commencing an undergraduate course, PGCE ( Post Graduate Certificate of Education) or an Advanced Learner Loan on or after 1 August 2023 will be on Plan 5.

For undergraduate courses, PGCE, or students who took out an Advanced Learner Loan or a Higher Education Short Course Loan between 1 September 2012 and 31 July 2023, will be on Plan 2.

Those who started their course before 1 September 2012 will be on Plan 1. Students studying or having studied a postgraduate master’s course will be on a Postgraduate loan.

Want advice on the payroll implications of these changes? Call us today.

Have you heard of fiscal drag?

A growing number of people are affected by changes to personal tax allowances and higher interest rates.

A phenomenon known as fiscal drag sees taxpayers pushed into higher tax brackets due to wage increases as they keep pace with inflation.

With the UK Government freezing most tax bands until 2028 and reducing the threshold on the additional marginal rate, fiscal drag can significantly impact people’s finances across different income levels.

Rising inflation

Due to rising inflation and to some degree economic growth, wages have risen from £406 a week to £533 on a median basis over the last ten years, according to Money Week.

It also reported that pay in the private sector, excluding bonuses, rose 6.5 per cent from November 2022 to January 2023.

While these rises may be good news, in reality, they are being eroded by spiralling inflation and the need to pay income tax at higher rates as people enter different tax bands.

Increased tax bills

According to Money Week, those earning £15,000, £20,000, and £30,000 will see their income rise by 21%, but their tax bills will increase by 106%, 50%, and 32%, respectively.

High earners paid over £50,000 are expected to see a 21% increase in wages and a 35% increase in their tax bill – adding £1,905 to their tax bill.

To avoid fiscal drag, people must carefully manage their income to take advantage of tax reliefs, allowances and tax-efficient investments.

Need advice on personal tax issues? Speak to us today.

Introduced by the Government in 2017, the Residence Nil Rate Band (RNRB) is an allowance to reduce inheritance benefits for families passing on their main property to a direct descendent. Since its introduction, millions of families around the UK have benefitted from its ability to minimise Inheritance Tax (IHT) bills.

Will the Residence Nil Rate Band mean paying less IHT?

As of the 2023/24 tax year, the basic Nil-Rate Band allowance on IHT is £325,000.

The RNRB gives you an additional tax-free allowance of £175,000 when passing your property to a direct descendant, meaning that the first £500,000 of your estate will be free of IHT.

Current IHT relief thresholds will remain frozen until April 2028. 

With house prices rising, this freeze will affect many families who will find themselves increasingly above the thresholds and ultimately paying more tax.

The RNRB only comes into effect if the residences are passed directly to descendants, who are:

• A child, stepchild, grandchild, or other lineal descendant
• A spouse or civil partner of a lineal descendant (including their widow, widower, or surviving civil partner)
• An adopted or fostered child
• A child where they’re appointed as a guardian or special guardian when the child is under 18

Direct descendants do not include nephews, nieces, siblings, and other relatives not included in the above list.

Can my RNRB allowance work in addition to my spouse’s?

As with the basic IHT allowance, any unused RNRB allowance is transferrable to an individual’s spouse or civil partner upon death.

Descendants of spouses can claim a tax-free allowance from both individuals, a total of £650,000 in basic IHT Nil-Rate Band allowance and £350,000 from RNRB.

Therefore, descendants can enjoy £ 1 million of an estate tax-free if they meet the right conditions.

RNRB on high-value properties

On estates worth £2 million or more, the RNRB allowance will reduce by £1 for every £2 that the estate is worth.

However, the amount of transferable RNRB to a surviving spouse or civil partner is affected, so you must calculate the figures correctly.  

Maximise your tax savings. 

Seek professional advice to take full advantage of the tax planning opportunities this offers. 

For help and advice with IHT and the RNRB, contact us today.

Residential landlords are the latest group receiving ‘nudge’ letters from HM Revenue & Customs (HMRC).

A part of a targeted ‘nudge’ campaign from HMRC, the letters remind landlords of their obligation to declare their rental income.

What is a ‘nudge’ letter?

Since 2017, HMRC has used these ‘nudge’ letters to communicate and prompt responses from recipients by offering reduced fines for a declaration of unpaid tax.

We have seen the method used for taxpayers holding overseas bank accounts and individuals claiming non-domicile status.

Holders of crypto-assets have also received nudge letters reminding them that Capital Gains Tax (CGT) is payable on income gained from the sale or trade of crypto assets.

The letters sent to landlords suggest they review their tax position and complete a certificate of tax position within 30 days.

Failure to reply could lead to fines, further investigation, or criminal prosecution.

So far, nearly 1,000 property owners are suspected of tax underpayments and received ‘nudge’ letters.

Evidence gathered via online data tracking

Online booking platforms, VRBO and Airbnb, gathered evidence behind this recent approach, as they are obligated to share data of registered users and their financial transactions. 

Issuing the letters is a way to give taxpayers a genuine chance to rectify any discrepancies and pay tax on undeclared income.

Landlords can take out Client Protection Insurance via their accountant, which protects them against the costs of an HMRC investigation.

Have you received an HMRC ‘nudge’ letter? We advise you to seek professional guidance from a tax specialist. Contact our tax team and arrange a free consultation. 

Introduced in 2013, the High Income Child Benefit Charge (HICBC) charges tax on individuals claiming child benefits who earn over £50,000 annually. 

The tax charges equate to the following:

• 1%of the total Child Benefits received for every £100 earned over £50,000
• 100% of the total Child Benefit received for individuals earning over £60,000 annually

A decade has passed since the introduction of the HICBC, and these thresholds have never changed. 

More people are passing beyond the existing threshold and into the charges territory. Individuals falling into this category can opt out of receiving child benefits and avoid paying the charge. Unsurprisingly, as the number of workers reaching the threshold has increased, so has the numbers opting out.

As of the August 2022 year-end, 683,000 families had opted out of receiving child benefits due to the HICBC – a figure that jumped five per cent from 651,000 in 2021. 

Points of tension

As highlighted in a recent debate, HICBC impacts families, and the Government is aware of particular ‘points of tension’.

However, Victoria Atkins, financial secretary to the Treasury, argued that: “increasing the threshold to more than £50,000 could impact the Government’s spending on public services.”

Should I opt out of the High Income Child Benefit Charge?

While it may appear logical to avoid the High Income Child Benefit Charge if you earn over £60,000 a year, you will encounter certain pitfalls if you do so, namely missing out on National Insurance (NI) credits. 

NI credits are necessary to qualify for certain benefits, including your state pension and the claimant’s child not automatically receiving a National Insurance number. 

Weigh up these factors before you choose to opt out. You can get more information and advice about this charge and its obligations to higher earners, by contacting us today.

Determining the ideal salary for company directors can be tricky for business owners.

Often, most directors want to balance their salary and dividend payments to be as tax efficient as possible.

The 2023/24 tax year presents an array of factors to consider, such as income tax thresholds, National Insurance contributions (NICS), and personal tax allowances.

We explore the available options that company directors should assess when balancing their salaries and dividends.

The tax-free personal allowance

The tax-free personal allowance for the 2023/24 tax year stands at £12,570. If you keep your salary below this threshold, you can avoid paying any PAYE income tax.

However, for every £2 you earn above £100,000, you lose £1 of your personal allowance, meaning it drops to zero once your income reaches £125,140.

National Insurance considerations

Your company will be required to pay 13.8% in Employers’ NICs on salaries exceeding £9,100 per year.

However, the Employment Allowance allows eligible businesses to reclaim up to £5,000 in Employers’ NICs.
To benefit from this, directors must earn at least £9,100, although this does not apply to sole directors without other employees.

If your salary exceeds the Primary Threshold (£12,570 for 2023/24), you must personally pay National Insurance.

Pension and minimum wage concerns

To understand how your state pension is affected by your National Insurance Contributions, consult with The Pension Service. 

If your salary is too low, it may impact your pension entitlement. Your salary must exceed the Lower Earning Limit (£6,396 for 2023/24) to secure your entitlement to future state pensions and benefits without paying National Insurance. 

You must pay yourself the National Minimum Wage (£10.42 per hour for adults over 23) if you have an employment contract with your company. 

Director’s salary

If you are not earning any other income, directors can withdraw a maximum salary of £758. Also, from 6 April 2023, the first £1,000 of dividends remains tax-free. Beyond that, dividend income is taxed:

• Basic tax rate – 8.75%
• Higher tax rate – 33.75%
• Additional tax rate (now above £125,140) – 39.35%

You can reach a tax-efficient balance if you weigh these above points and your pay objectives. 

Ensure compliance

HMRC is increasing checks to ensure dividend payments are accurately recorded. To satisfy HMRC and Company law requirements, directors should consider company reserves, cash flow, personal tax situations, and director requirements when determining dividend amounts.

Additionally, directors should hold meetings to decide on dividend amounts, and payment methods, and record minutes to maintain accurate documentation.

If you need advice on remuneration for your directors, please get in touch.

A new failure to prevent employee fraud offence is being introduced by the Government to encourage businesses to do more to deter offending, which will ultimately protect themselves, consumers, and other businesses.

The new legislation, which is likely to come into force by the end of 2024, will make it easier to prosecute a large organisation if an employee commits fraud for the organisation’s benefit.

Larger organisations in the firing line

The new legislation, being introduced in the Economic Crime and Corporate Transparency Bill, will target a wide range of large businesses across all sectors, including not-for-profit organisations such as charities and incorporated public bodies.

A large organisation is defined (using the standard Companies Act 2006 definition) as an organisation meeting two out of three following criteria:

• More than 250 employees
• More than £36 million turnover
• More than £18 million in total assets

Potential Penalties

A business could face legal action under the new legislation if, for example, employees were selling products to a customer under false pretences, or falsified accounts to mislead investors.

The business in these scenarios could receive an unlimited fine if it is found to not have reasonable fraud prevention procedures in place.

These severe penalties are seen to encourage businesses to clamp down on fraudulent activities within their organisation.

SMEs still bound by fraud legislation

The above thresholds mean that small and medium-based enterprises (SMEs) will be exempt from the new offence, but they will remain accountable under the existing legal framework. These thresholds can be amended in the future through secondary legislation if necessary.

Small and medium enterprises are often the businesses that fall foul of fraud committed by larger organisations so they may benefit from the greater protection that the new legislation will bring.

What you need to do

If your business falls below the thresholds mentioned above, then while it is important to keep an eye on the existing legal framework, your organisation should not be impacted all that much.

If your business is in this scope, then it is of vital importance to ensure you have the necessary fraud prevention measures in place.

Need help with employee fraud prevention or advice on the new legislation? Contact us today.

Tour operators, travel agencies and hoteliers must understand their financial position and put plans in place for stable, durable growth. Budgeting and forecasting are indispensable tools for the travel and hospitality industry to formulate, determine and align organisational short-term and long-term goals.

The practices are slightly different, but combined, they help businesses in the travel and hospitality industry ensure that they are on a firm financial footing.

What is budgeting?

Budgeting refers to the process of setting financial targets for an organisation.

Your budget is a comprehensive document outlining how much money you allocate to different departments, activities, and projects across the business.

Budgets are usually set for a fixed period, often for each financial year, and are used to monitor and control expenses whilst measuring actual business performance.

What is forecasting?

Preparing a forecast will give you a more realistic overview of the year ahead.

Forecasting is a framework for predicting future financial outcomes based on historical data, market trends, and other relevant factors. Using forecasts will identify potential risks and opportunities, assess the impact of different scenarios, and make informed decisions.

How do budgets and forecasts differ?

The main difference between budgeting and forecasting is that budgeting focuses on setting targets and allocating resources, whereas forecasting predicts future outcomes and identifies potential risks and opportunities.

Budgeting is a proactive process that helps companies plan and control their finances whilst forecasting reflects what will happen and enabling companies to respond to changes in the market.

Potential challenges

Budgeting and forecasting equally have their challenges, with forecasting maintaining the potential for error.

The travel and hospitality market is unpredictable as the industry is influenced heavily by external factors such as the economy, industry trends, and unexpected events such as the Covid-19 pandemic.

Limitations on the availability and accuracy of data can also present challenges. Companies need to have access to reliable data from a range of sources to generate forecasts. Effective data sharing is crucial across the organisation.

Accurately predicting future outcomes with these factors can be difficult.

Budgeting is usually more straightforward, but several variables can make a difference, including uncertainty of demand, seasonality, cost of goods and services, competition, and currency fluctuations. Companies must carefully monitor these factors and adapt their budgets to remain competitive and achieve their financial goals.

How to get it right

There is no single quick fix for accurate budgeting and forecasting. Getting it right is usually the result of attention to detail, thorough analysis, and good practice over time.

Caryl King heads up the travel and hospitality team and shares some advice for business owners within the sector.

“When creating your budget plan, you must define your goals whilst understanding the risks and get to grips with your cash flow and income. Include all expenses and allow for some slack across activities or departments. 

To prepare your forecast, you must gather historical data on the company, the industry, and other external factors that impact your business. 

Be realistic. Assess your business plan thoroughly, monitor performance regularly and have a contingency plan for the unexpected.

You must regularly revisit your budget, checking it aligns with your forecast and adjust or amend as necessary throughout the year.”

By taking valuable insights from past performance, being alert to potential risks and opportunities, and adjusting their budgets accordingly, travel and hospitality businesses are better placed to ensure their stability and achieve their financial goals.

Do you require budgeting and forecasting help for your travel, hospitality, or leisure business? You can arrange a free consultation with our team of specialist travel and hospitality advisors.