As we head towards April now is the time to think about tax planning, doing the year end administration and filing the necessary forms to HMRC.
Pension
Time is running out to make the most of your tax allowances this year. The first step to making the most of your tax allowances can mean looking closely at your pension. UK residents under 75 can add money to a pension and receive tax relief on it. You’ll automatically get basic rate tax relief (currently 20%) paid into your pension by the government.
If you pay tax at a higher rate you could get up to a further 25%, but you will need to claim it by declaring any pension contributions you have made on your tax return.
The annual allowance is the maximum you can invest in your pension each year that would be eligible for tax relief. It is currently £40,000, or your entire income, whichever is the smaller and there are lifetime allowances to consider.
If you run a limited company then there are some actions you could consider such as dividend and salary planning, purchasing capital items to maximise capital allowances, research and development tax credits and a range of other matters.
Payroll Administration
If you run your own payroll, it is time to look at the end of year payroll tasks for the current year and key changes affecting payroll for 2021-22.
HMRC have updated their webpage on annual reporting and tasks needed before 5 April 2021. This covers sending your final payroll report, updating employee payroll records, updating payroll software, issuing P60s and reporting expenses and benefits.
Minimum Wage for the tax year 2021-2022 will be:
| Category of worker | Hourly rate |
| Aged 23 and above (national living wage rate) | £8.91 |
| Aged 21 to 22 inclusive | £8.36 |
| Aged 18 to 20 inclusive | £6.56 |
| Aged under 18 (but above compulsory school leaving age) | £4.62 |
| Apprentices aged under 19 | £4.30 |
| Apprentices aged 19 and over, but in the first year of their apprenticeship | £4.30 |
These rates apply from 1 April 2021.
If we prepare your payroll we will of course file the necessary tax year end forms for you and keep you informed of any changes.
Prepare for tax changes if you engage or supply contractors – Off-payroll working rules (IR35)
If you are a medium or large sized non-public sector organisation and you engage contractors, you should now be taking action to prepare for changes to the off-payroll working rules (IR35) coming into effect on 6 April 2021.
For all contractors working through their own limited company, you will need to:
- identify contractors who work in this way
- decide if they are inside or outside the rules
- inform your contractors of their status determination, and any agencies you engage with
- be ready to add them to payroll if needed
- be ready to deal with any disputes
- maintain an audit trail, and test your processes, systems and controls
If you are an employment agency which supplies contractors who work through their own limited company or other intermediary, you need to understand the changes and may also need to take action. You need to:
- identify contractors who work in this way
- be ready to pass on the status determination statement to any agencies you engage with down the supply chain or be ready to put contractors onto payroll
- maintain an audit trail, and test your processes, systems and controls
You can find more information about the actions you need to take to prepare here.
The Marriage Tax Allowance
A little known scheme that allows a person to share their personal tax-free allowance with their partner every year. Through it, a spouse with an income of £12,500 or less can transfer 10% – up to £1,250 – of their allowance to their husband, wife or civil partner – if their income is higher. However, the marriage allowance can only be backdated for four tax years, so if you are hoping to claim for the 2016/17 tax year, you must do so before 5 April 2021!
Please talk to us about tax planning for your business – we are here to support you in preparing for the new tax year and beyond! Give us a call on 01332 292022 or drop us an e-mail. We’d love to have a coffee and chat over zoom!