Choosing an Accountant- Why it’s Important to Get it Right

It’s fair to say that when you first set up your own business, your ‘to-do’ list will most likely be full of important jobs to get done, things like purchasing insurances and obtaining business contracts. And one of the items that should be at the top of that list is making sure that you have a great accountant. Not only will they be there to save you time and assist with the necessary filing requirements you will have for yourself and your business, they will also be able to keep you up to date with legislation that could otherwise pass you by.

So, with so many options out there, what should you be looking for in an accountant?

Personal recommendation

If you have friends working in the same sector, then a great first step is asking them who their accountant is, and whether they would recommend them. Nothing really beats a personal recommendation from someone that you already trust.

Another good option is to check out review sites to read first hand reviews from current/previous clients. There are various review sites for accountants out there, (such as this one), and most firms will also have a number of Google reviews if you search for them.

Reasonable, fixed fee

We specifically use the word ‘reasonable’ here, rather than ‘cheap’ because it is fair to say that when it comes to choosing an accountant, there is an element of ‘you get what you pay for’, so simply picking one because they are cheap may well not work out best in the long run. The best thing to do is to have a look around various different accountants, and check exactly what they are offering for their fees. A firm offering a ‘too good to be true’ fee may be doing so because they’re going to then charge you extra for various essential services, or perhaps they have recently gone through some negative publicity and are desperate to reinstate a dwindling client base.

We would always recommend choosing an accountant who has a fixed fee as well, so that you know how much you will be paying each month, and for what. The last thing you want is to find yourself being hit with hidden charges, or unexpected fees partway through your engagement, so it is always worthwhile checking exactly what you are going to be getting for your money.

A cyber conscious and secure firm

We live in an age where so much of our data is online. And whilst this is incredibly handy, it can also be risky if it isn’t protected adequately. If your data is leaked or hacked, you could be at risk of identity theft, or even financial theft if certain information including passwords becomes accessible. In recent months, certain accountancy firms have found themselves the target of cyber attacks, leaving their clients’ information at risk.

If you have an accountant, then chances are, they hold a lot of personal information on you, be that address, date of birth, national insurance number, bank account details etc, so it is highly important to ensure that whoever you choose to appoint as your accountant can give you reassurance as to how they protect your data.

You are still in control

In 2007, MSC (Managed Service Company) legislation was brought in to prevent accountants having ‘too much control’ over their client’s businesses. Recently, this has reared its head, as certain accountancy firms have been deemed by HMRC (under appeal) to be MSC providers, leaving their clients hit with PAYE bills from HMRC. Therefore, it is important that you check that your accountant is not an MSC provider, and that you still have control over things like raising invoices, obtaining new work contracts, paying salary/dividends etc.

Dedicated, qualified accountant

There are a number of accountancy firms out there that, each time you contact them, you will be speaking to someone different. However, we believe that it’s really important for you to have a consistent point of contact for your accountant. When you are busy running your own business, the last thing that you want is to be speaking to someone different every time you ring up, or worrying that deadlines may be missed as you get passed from pillar to post. So, you should always check that you will have a dedicated accountant and find out exactly who you will be dealing with on a day to day basis, and also check whether they have a direct dial that you will be able to contact them on, rather than reaching a call centre.

It is also worth checking that your accountant is suitably qualified, whether that be through years of experience, or professional qualifications such as AAT, ATT ACCA, ACA or CIPFA, and that they have good experience in the contractor market. You should also ensure that the accountancy practice itself is regulated. That way, if you do have any problems, you will have the option to escalate these to their professional body (something that you wouldn’t be able to do if the firm is not regulated).

It is also important that your accountant is approachable and on hand to answer any question you have, no matter how big or small. Accounting and taxation can be complicated, and whilst of course, you don’t want to be having to be undertaking some sort of accounting qualification yourself, you will want an accountant who is able to explain anything that you are unsure of so that you have confidence in what is being submitted in your name.

Modern, reliable technology

Luckily, gone are the days when accountants worked solely on paper or excel spreadsheets. Now, there is so much amazing accounting software out there, meaning that the hassle of maintaining accounting records has all but gone, and that both you and your accountant will be able to access your accounting records at any time. Using well established cloud software, such as FreeAgent, is much less time consuming not only for you, but also for the accountant which will leave them with more time to be proactive with the advice that they give.


PaperRocket Accounting provide accounting and tax services to professional contractors, freelancers, and small businesses working in the UK.

We offer our clients a flexible choice of fixed fee monthly packages which cover all of their accounting and tax needs (so no hidden costs or surprise bills!). All of our accounting packages include a monthly subscription for a cloud accounting software subscription provided by the awarding winning FreeAgent.

Each of our clients is given their own dedicated qualified accountant with unlimited access in person, telephone, or by email.

We pride ourselves on our client satisfaction and customer service and were awarded ‘Best Contractor Accountancy’ firm 2020 in The Contracting Awards and ‘Welwyn Hatfield Business of the Year 2019’ in the SME Hertfordshire awards.

To find out how we can help you please get in touch now.

Managed Service Company Legislation- Should I Be Worried?

If you keep up to date with the latest HMRC or contractor goings on, you may have heard recently about HMRC targeting contractors with large tax bills, having accused their accountant of being a Managed Service Company (MSC). So, what is an MSC, and should you be worried?

What is a Managed Service Company?

Before 2007, MSCs were a popular alternative for contractors to setting up a limited company. Essentially, they worked in a way that meant that the contractor got the tax benefits of working through a limited company, without the responsibility, which was left to the MSC service provider. An MSC will be involved in the company, possibly benefiting financially from it’s successes, as well as influencing/controlling the running of the business and provision of the services. Before 2007, it was common place for these MSCs to raise invoices on behalf of their clients and control their company bank accounts issuing salary/dividends to them.

However, in April 2007, MSC legislation was introduced to outlaw this practice, with anyone deemed to be working under an MSC to be subject to PAYE tax and National Insurance as though they were working as a payrolled employee.

So, what’s happened now?

As a result of this legislation, previously defined MSCs had to change their ways (usually converting to act as an umbrella company) or risk being put out of business. And most did. However, in March this year, apparently out of the blue, contractors using the accountants Churchill Knight and Boox started receiving tax demands from HMRC, accusing them of being Managed Service Companies and the accountants of being Managed Service Providers, something which both accountancy firms deny strongly, and are appealing against.

Should I be worried that my company may be seen as an MSC?

It is very important that when it comes to your limited company, you are the one that is in control. Your accountant should not have access to your bank account, they shouldn’t be raising invoices on your behalf nor negotiating terms of your contract for you (or receive any sort of commission for contracts that you take on).

Depending on the outcome of the Churchill Knight & Boox probes, HMRC may well target other contractors and accountancy firms and agencies in the future. However, here at PaperRocket Accounting, we are confident that we would not be deemed to be a MSC provider. We ensure that we never do anything that could be interpreted as helping to run, or influence our client’s businesses.


PaperRocket Accounting provide accounting and tax services to professional contractors, freelancers, and small businesses working in the UK.

We offer our clients a flexible choice of fixed fee monthly packages which cover all of their accounting and tax needs (so no hidden costs or surprise bills!). All of our accounting packages include a monthly subscription for a cloud accounting software subscription provided by the awarding winning FreeAgent.

Each of our clients is given their own dedicated qualified accountant with unlimited access in person, telephone, or by email.

We pride ourselves on our client satisfaction and customer service and were awarded ‘Best Contractor Accountancy’ firm 2020 in The Contracting Awards and ‘Welwyn Hatfield Business of the Year 2019’ in the SME Hertfordshire awards.

To find out how we can help you please get in touch now.

P11ds- What They Are And Whether You Need To Complete One

Now that we are a few weeks into the 2022/23 tax year, it’s time to start getting everything tied up in order to say goodbye to the 2021/22 tax year. And one of the first things you’ll want to see to is your P11d for the year- if, that is, you need to complete one.

What is a P11d?

A P11d is a filing used to report any Benefits in Kind.

So, what are Benefits in Kind?

Generally, any items or services that you or your employees receive from the company in addition to your salary, or any expenses that have been put through the company that are not wholly, exclusively, and necessarily for the purpose of the business, will be deemed to be a benefit in kind. Some of the most common examples are:

  • Interest free (or below HMRC interest rate) loans (over £10,000)
  • Company cars
  • Private healthcare
  • Gym membership
  • Assets provided to an employee with significant personal use
  • Non business travel/entertainment expenses
Do I need to file one?

If you’re an employer with a PAYE scheme open, then most probably yes. It is the responsibility of the employer for filing a P11d, not the employee (if contracting through your own company, this will fall to you). If you had a PAYE scheme open at all during the tax year in question then you will be required to submit a P11d for the year. Even if there have been no benefits in kind during the year, you will still need to file a ‘nil’ P11d.

Will the employee/employer need to pay anything?

If an employee has received a benefit in kind, then yes. As a benefit in kind effectively increases the employee’s salary, there will be National Insurance contributions payable on them. This currently stands at a rate of 13.8% and will be payable by the employer (n.b. this will increase from 13.8% to 15.05% for the 22/23 tax year to account for the Health and Social Care Levy). However, what this 13.8% will be charged on depends on the benefit, so it is always advisable to have an accountant assist with the completion of this form. You will also need to bear in mind that because it effectively increases salary, this will need to be included in any tax planning, as tax and employees national insurance will be due on the benefit.

When is it due?

Regardless of your company accounting year, all P11d filings cover the standard tax year (6th April – 5th April). All P11ds must be filed by 6th July following the end of the tax year. Any payment due must reach HMRC by the 22nd July (19th July if paying by cheque). The deadline for filing the 21/22 P11d is 6th July 2022. If your P11d is late, you will receive a penalty of £100 per 50 employees for each month (or part month) it is late. If payment is late, you will also receive penalties and late payment interest on that.

Important Note- Trivial Benefits

As an aside, one thing that doesn’t need to be included on your P11d are Trivial Benefits. Provided certain rules are adhered to, trivial benefits paid to your employees will not need to be declared and therefore not be taxed as a BIK. The rules are that the benefit must not:

  • Exceed £50 (not even by 1p or the whole amount becomes taxable). If, for example, you take a number of staff out for a meal, this can be averaged out per head.
  • Be cash (although gift vouchers are allowable, provided they can’t be exchanged for cash).
  • Be a reward of normal employment duties.
  • Be part of any contractual obligation/salary sacrifice scheme.
  • If the benefit is paid to a company director, then there is an annual cap of £300 (again, each individual benefit can’t exceed £50).

PaperRocket Accounting provide accounting and tax services to professional contractors, freelancers, and small businesses working in the UK.

We offer our clients a flexible choice of fixed fee monthly packages which cover all of their accounting and tax needs (so no hidden costs or surprise bills!). All of our accounting packages include a monthly subscription for a cloud accounting software subscription provided by the awarding winning FreeAgent.

Each of our clients is given their own dedicated qualified accountant with unlimited access in person, telephone, or by email.

We pride ourselves on our client satisfaction and customer service and were awarded ‘Best Contractor Accountancy’ firm 2020 in The Contracting Awards and ‘Welwyn Hatfield Business of the Year 2019’ in the SME Hertfordshire awards.

To find out how we can help you please get in touch now.

Happy New Tax Year!

We have now bid adieu to 2021/22 and stepped foot into the 2022/23 tax year, which runs from 6th April 2022 to 5th April 2023. In this week’s blog, we break down what the start of the new tax year means for you, and what allowances are available to you in 2022/23.

Personal allowance

The personal allowance for 2022/23 remains the same as 21/22 at £12,570.

Rates of income tax

Again, the income tax bands remain the same as last year, at:

Personal allowance-        Up to £12,570                   0%

Basic rate-                          £12,5711- £50,270          20%

Higher rate-                       £50,271- £150,000          40%

Additional rate-                £150,001 +                        45%

The above assumes entitlement to the standard personal allowance.

National Insurance Rates

To take into account the new Health and Social Care Levy, NI rates have increased.

Class 1 (employees)- Assuming a standard NI category, this now means earnings over the primary threshold (see details below) up to the upper earnings limit have NI applied at 13.25%, and over the upper earnings limit at 3.25%.

Class 1 (employers)- this has now increased to 15.05% on employee wages over the secondary threshold.

Class 2 (sole traders)– This is £3.15/week for profits over the Small Profits Threshold.

Class 4 (sole traders)– For profit over the Lower Profits Limit, the NI rate increases to 10.25%, and over the Upper Profits Limit, increases to 3.25%.

National Insurance thresholds

As detailed in the Spring Statement, the Primary Threshold will be increasing from July 2022 (the below figures are annual):

Lower Earnings Limit-     £6,396

Primary Threshold-         £9,880 increasing to £12,570 in July

Secondary Threshold-     £9,100

Upper Earnings Limit-     £50,270

Small Profits-                    £6,725                 

Lower Profits Limit-         £9,881

Upper Profits Limit-         £50,270

Tax free dividend allowance and dividend tax rates

This also remains the same for the new tax year, with the first £2,000 of dividends received being tax free.

However, the rates at which subsequent dividends are taxed have also increased, to take into account the Health and Social Care Levy:

Basic rate-                          8.75%

Higher rate-                       33.75%

Additional rate-                39.35%

Personal savings allowance

Again, this remains the same as 2021/22, with basic rate tax payers being able to receive up to £1,000 interest tax free, and up to £500 for higher rate tax payers.

Employment Allowance

In the Spring Statement, it was announced that this would increase to £5,000 per year per eligible employer for 2022/23.

Capital Gains Tax

Neither the rates of CGT have changed, nor the Annual Exemption Allowance which remains at £12,300.

Business Asset Disposal Relief (previously Entrepreneurs Relief)

This is still available at 10%, with a lifetime limit of £1million.

S455 tax (on director’s loan accounts)

This has increased in line with the higher rate dividend tax to 33.75%.


PaperRocket Accounting provide accounting and tax services to professional contractors, freelancers, and small businesses working in the UK.

We offer our clients a flexible choice of fixed fee monthly packages which cover all of their accounting and tax needs (so no hidden costs or surprise bills!). All of our accounting packages include a monthly subscription for a cloud accounting software subscription provided by the awarding winning FreeAgent.

Each of our clients is given their own dedicated qualified accountant with unlimited access in person, telephone, or by email.

We pride ourselves on our client satisfaction and customer service and were awarded ‘Best Contractor Accountancy’ firm 2020 in The Contracting Awards and ‘Welwyn Hatfield Business of the Year 2019’ in the SME Hertfordshire awards.

To find out how we can help you please get in touch now.

Spring 2022 Statement

With the cost of living sky rocketing at the moment, it’s fair to say that all eyes were on the Chancellor as he stood up to deliver this year’s Spring Statement. In normal times (who can remember those eh!), nothing much would come from these statements, as all the big information was released in the Budget. However, it was clear that this statement would have to be different, as many families are in fear of plunging into poverty with rising energy, fuel and food costs.

And after a slow start (which we must confess, did have this author shouting ‘is that it?’ at the TV!), a number of measures that will have a direct, relatively immediate impact on people’s finances were announced.

The headline measure has to be the Increase of the National Insurance threshold

From July 2022, the National Insurance threshold will be raised from £9,880 to £12,570, bringing it in line with the income tax personal allowance. This means that for most, the first £12,570 of their income will be tax and NI free, equating to an average saving of £330/year.

The Health and Social Care Levy (an extra 1.25 percentage points added to the NI rate (12% increased to 13.25%) from 6th April 2022) has not been scrapped, so those who do end up paying NI, will still pay that extra amount, but for many, this will be negated by the savings made with the rise in NI threshold.

Employment Allowance

From 6th April 2022, the Employment Allowance will increase from £4,000 to £5,000, meaning that it will be cheaper for businesses to employ staff, with eligible employers able to reduce their NI liability by £5,000.

Fuel Duty

From 6pm on the 23rd March 2022, fuel duty will be cut by 5p until March 2023.

VAT Reduction on Energy Saving Materials

For the next 5 years, homeowners will not have to pay any VAT on the installation of energy saving materials such as solar panels (down from 5%).

Household Support Fund

The Household Support Fund, which is available to local authorities to help vulnerable families at their choosing, is to be doubled to £1billion.

The Chancellor also announced some longer term plans:

  • From 2024, it is planned that income tax will reduce from 20% to 19%.
  • R&D tax credits to be reformed to make them ‘more generous but better value for money’.
  • Tax rates on business investments to be cut in the Autumn Budget, after consultations with businesses over the best way to do this.

PaperRocket Accounting provide accounting and tax services to professional contractors, freelancers, and small businesses working in the UK.

We offer our clients a flexible choice of fixed fee monthly packages which cover all of their accounting and tax needs (so no hidden costs or surprise bills!). All of our accounting packages include a monthly subscription for a cloud accounting software subscription provided by the awarding winning FreeAgent.

Each of our clients is given their own dedicated qualified accountant with unlimited access in person, telephone, or by email.

We pride ourselves on our client satisfaction and customer service and were awarded ‘Best Contractor Accountancy’ firm 2020 in The Contracting Awards and ‘Welwyn Hatfield Business of the Year 2019’ in the SME Hertfordshire awards.

To find out how we can help you please get in touch now.

PaperRocket Accounting Shortlisted in Two Categories at The Contracting Awards

We are very proud to announce that, for the third year running, PaperRocket has been shortlisted as ‘Best Contractor Accountantancy (<1000 clients)’ at The Contracting Awards!

The Contracting Awards recognise the top contractor suppliers in the UK, from accountants, to banks and mortgage providers. These awards reflect the top service providers in areas that contractors most need excellent service and in 2020 (the last time the awards were held due to the pandemic), PaperRocket won this hard fought category, and we are over the moon to be shortlisted again.

We also have representation in another category this year, ‘Best Contractor Accountant’, as our senior accountant, Nikki Norman, has been shortlisted!

Sarah Solo, director of PaperRocket Accounting says ‘Being shortlisted in not one, but two categories this year, is an amazing achievement and well-deserved recognition of all the hard work the PaperRocket team dedicate to client service.  Having our senior accountant, Nikki, personally shortlisted as ‘Best Contractor Accountant’ is very exciting, and we can’t wait for the awards evening!’

The awards event will be held on 16th June 2022 in London.


PaperRocket Accounting provide accounting and tax services to professional contractors, freelancers, and small businesses working in the UK.

We offer our clients a flexible choice of fixed fee monthly packages which cover all of their accounting and tax needs (so no hidden costs or surprise bills!). All of our accounting packages include a monthly subscription for a cloud accounting software subscription provided by the awarding winning FreeAgent.

Each of our clients is given their own dedicated qualified accountant with unlimited access in person, telephone, or by email.

We pride ourselves on our client satisfaction and customer service and were awarded ‘Best Contractor Accountancy’ firm 2020 in The Contracting Awards and ‘Welwyn Hatfield Business of the Year 2019’ in the SME Hertfordshire awards.

To find out how we can help you please get in touch now.

PaperRocket Awarded Cyber Essentials Certification – You Can Trust in Us to Keep Your Personal Data Secure and Safe

In 2022, we live in a digital age, where every day, most of us carry around more data that could ever have been imagined in a phone no bigger than your hand. But, as the saying goes, with great power comes great responsibility, and whilst having such easy access to our own data is, in so many ways, a wonderful thing, it’s also a criminal’s dream. This is why it is so important to ensure that your data is as protected as possible, whomever it is held by, something that the GDPR (General Data Protection Regulations) introduced in 2018 aimed to do.

And so, we are very happy to announce that PaperRocket Accounting has been awarded the Cyber Essentials certification, meaning that you can trust in us to keep your personal data safe and secure.

GDPR- What it is?

The GDPR is the toughest privacy and security law in the world. If you cast your minds back to 2018 (PP- pre pandemic if you will!), you may remember having an inbox flooded with emails from pretty much any company you’ve ever had any dealings with regarding new privacy policies, and opt in marketing requests. This is because, as part of the GDPR, any organisations who hold data on individuals are required to have certain measures in place to protect this data, be it from misuse or potential hackers. And if the UK body in charge of these regulations, the ICO (Information Commissioner’s Office) find that a company has violated these rules, severe penalties can be levied (up to €20 million, or 4% annual global turnover).

GDPR- Why it’s important?

As we started off in this blog by saying, we live in an age where so much of our data is online. And whilst this is incredibly handy, it can also be risky if it isn’t protected adequately. If your data is leaked or hacked, you could be at risk of identity theft, or even financial theft if certain information including passwords becomes accessible. Therefore, it is so important that you take steps to ensure that you are protecting your data.

However, what about when you entrust your data with others? How can you be sure that they are taking the appropriate steps to protect you?

What your accountant should be doing to protect your information?

If you have an accountant, then chances are, they hold a lot of personal information on you, be that address, date of birth, national insurance number, bank account details etc. Therefore, your accountants are certainly one of the ‘data processors’ that you want to ensure are protecting your data well. Some of the ways they should do this are:

  • Maintaining firewalls on their computers.
  • Ensuring anything with access to personal data is password protected with a ‘strong’ password, not to be held anywhere other than a secure password manager, and not to be repeated for any other application.
  • Ensure only current employees have access to any client information or login details.
  • Any security updates to be automatically installed on company hardware.
  • All staff to have regular training on GDPR and the specific company data protection policies.

These are just a few of the ways that your data should be protected, there are many more.

What is Cyber Essentials?

Cyber Essentials provides a framework for businesses to protect themselves against a whole range of the most common cyber attacks. Annual reviews are carried out to check a company’s compliance and maintain certification. There are a variety of steps (including the ones above) that organisations must undertake to gain this accreditation. It is backed by the UK government and overseen by the National Cyber Security Centre.

Can you really afford to risk your data getting into the wrong hands?

Perhaps you have recently found yourself concerned about your current accountant’s cyber security, or maybe this blog has put some doubts in your mind. If either of these are the case, switching accountants is generally a straightforward process, with old and new accountants taking care of the bulk of the transfer for you. And now that PaperRocket is Cyber Essentials certified, this, as well as so many other reasons, is why we are safe hands for you and your business.


PaperRocket Accounting provide accounting and tax services to professional contractors, freelancers, and small businesses working in the UK.

We offer our clients a flexible choice of fixed fee monthly packages which cover all of their accounting and tax needs (so no hidden costs or surprise bills!). All of our accounting packages include a monthly subscription for a cloud accounting software subscription provided by the awarding winning FreeAgent.

Each of our clients is given their own dedicated qualified accountant with unlimited access in person, telephone, or by email.

We pride ourselves on our client satisfaction and customer service and were awarded ‘Best Contractor Accountancy’ firm 2020 in The Contracting Awards and ‘Welwyn Hatfield Business of the Year 2019’ in the SME Hertfordshire awards.

To find out how we can help you please get in touch now.

Saving Tax: Making the Most of Your Allowances Before the End of the Tax Year

With the cost of living set to sky rocket over the next few months, here at PaperRocket, we are dedicating a few of our weekly blogs to looking at ways to ensure that you are not missing out on any allowances that you may be entitled to, that could save you money in these testing times.

In this week’s blog, with the end of the tax year rapidly approaching, we are going to take a look at the various 2021/22 allowances we are entitled to, to help you check that you aren’t missing out on utilising any of them before they disappear with 21/22.

Dividend allowance

In the 21/22 tax year, there is a tax free dividend allowance of £2,000. This is irrespective of any other personal income that you may have in the tax year, so if you haven’t already withdrawn your tax free dividends, and if your company has the profit available, now is the time to do so.

Any dividends over the tax free £2,000 (but still within the basic rate tax band) will be taxed at 7.5%, so it is also advisable that, company profit dependant, you also take advantage of this low rate of tax by withdrawing dividends within the basic rate band, especially as, from 6th April 2022, this tax will increase from 7.5% to 8.75% to accommodate the Health and Social Care Levy.

Capital Gains Allowance

Any investment or funds including gains from the sale of properties that aren’t your main residence are subject to this tax on disposal, and each year you receive a tax free allowance for such income. For 21/22 this is £12,300 which can be used on gains before any tax is paid. The tax payable can be as high as 28% of the gain, and you are unable to carry over any allowance, so it is important that you plan the disposal of any assets taking this into account.

ISA allowance

If you have a large amount of savings attracting a large amount of interest (over £1,000 for basic rate tax payers, or over £500 for higher rate tax payers), then it may be worth investing in a ISA.

Since the introduction of the Personal Savings Allowance in 2016, having an ISA, for most, is no longer the most tax efficient way to save as, provided your interest does not exceed the above amounts for the year, no tax will be payable anymore. However, if you do receive interest in excess of these amounts, then it may still be worth investing and making use of your allowance for the year, which for 21/22 is £20,000. This allowance can be split between the various types of ISAs, cash ISAs, stocks and shares ISAs, Lifetime ISAs etc.

The Lifetime ISA (LISA) allows you to save towards a first home, or your retirement, with the government adding a 25% bonus on top of what you save. This has its own separate rule as to how much you can pay in per year which is £4,000.

Pension allowance

Each year, each UK tax payer an allowance of up to £40,000 (or possibly more if in the last 3 years you didn’t fully utilise your annual allowance) that can be invested into a pension.

If you pay into a pension personally, you will receive personal tax relief on this amount when you come to complete your self assessment return for the year.

If you pay into a pension directly from your company, your company will receive corporation tax relief on the amount paid as a tax deductible business expense.


PaperRocket Accounting provide accounting and tax services to professional contractors, freelancers, and small businesses working in the UK.

We offer our clients a flexible choice of fixed fee monthly packages which cover all of their accounting and tax needs (so no hidden costs or surprise bills!). All of our accounting packages include a monthly subscription for a cloud accounting software subscription provided by the awarding winning FreeAgent.

Each of our clients is given their own dedicated qualified accountant with unlimited access in person, telephone, or by email.

We pride ourselves on our client satisfaction and customer service and were awarded ‘Best Contractor Accountancy’ firm 2020 in The Contracting Awards and ‘Welwyn Hatfield Business of the Year 2019’ in the SME Hertfordshire awards.

To find out how we can help you please get in touch now.

Saving Tax: Understanding Your Tax Code

With the cost of living set to sky rocket over the next few months, here at PaperRocket, we are going to be dedicating a few of our weekly blogs to looking at ways to ensure that you are not missing out on any allowances that you may be entitled to, that could save you money in these testing times.

This week we will be looking at tax codes. Having an incorrect tax code applied to your salary can potentially leave you out of pocket, or perhaps even worse, with an additional amount of tax to pay in the future.

Who has a tax code and what are they for?

Anyone who is in full or part time employment, or receiving a private pension will have a tax code. Those who are self employed, unemployed or receiving the state pension will not have a tax code.

Your tax code will tell your employer the amount of tax that they need to deduct from your wages/pension before the net amount is paid to you. They will then pay this over to HMRC on your behalf. The tax code indicates to employers what amount of ‘personal allowance’ you are entitled to- that is, how much of your salary is tax free. It is worth noting that if you have more than one job, then you will have different tax codes for each employment.

Where can I find my tax code?

Your tax code should be on anything PAYE related from your employer, so payslips, P45, P60s etc. Just before the start of each tax year, HMRC should write to you to let you know your tax code for the upcoming year.

If HMRC have reason to change the tax code partway through the year, they will write to you with your new code, as well as a breakdown of how it has been made up.

What your tax code means

If you check your tax code, you will notice that it is usually made up of a combination of letters and numbers. The standard tax code for 21/22 (and indeed, until 2026 as the personal allowance has been frozen until then) is 1257L.

The numbers reflect what your tax free allowance is. You take the numbers, and then add a zero onto the end, and that is the amount that you can earn before you start having to pay tax. So, with the standard 1257L tax code, this means you are entitled to £12,570 tax free income for the year. The number may be higher or lower than 1257 if you have any employment benefits or expenses. So, if, for example, you have a company car, your personal allowance will be reduced, and the number will be lower than 1257. Equally, if you have employment expenses that you pay for personally, for example, professional memberships, this number will be higher.

The letters are a bit more complicated as there are a number of different letters that can be used, meaning various different things- the full list can be found on the HMRC website here. The most common ones are:

  • L– the standard tax free personal allowance
  • M or N– these relate to claiming the marriage allowance (discussed in last week’s blog here). The letter will be M if you are the recipient of 10% of your partner’s personal allowance, and N if you are the one transferring your allowance to your partner.
  • T– your tax code includes other calculations to your personal allowance. If this is the case, these will be broken down in your coding notice.
  • BR– this is common if you have more than one job, and your personal allowance is being used up in the other employment. It stands for Basic Rate, and means that all of your income from that job will be taxed at the basic rate.
  • W1/M1/X– these indicate an emergency tax code, that will be updated once HMRC have all of the details required to issue your correct tax code.
  • K– a K at the start of your tax code is issued when you have other untaxed income, or underpaid tax from previous years, and it is worth more than your personal allowance. In this instance, your employer will deduct the tax that would be due on your untaxed income, from their employment income.
What if I think my tax code is wrong?

If you have a government gateway account, and you know what changes need to be made (for example, you want to include employment expenses or benefits), you can login and request the change online.

If, however, you are unsure, or the situation is a bit more complicated, it is probably worth speaking to a real life human (rare, I know, in this day and age) by calling HMRC on 0300 200 3300, and they will be able to advise and get your code updated if necessary.


PaperRocket Accounting provide accounting and tax services to professional contractors, freelancers, and small businesses working in the UK.

We offer our clients a flexible choice of fixed fee monthly packages which cover all of their accounting and tax needs (so no hidden costs or surprise bills!). All of our accounting packages include a monthly subscription for a cloud accounting software subscription provided by the awarding winning FreeAgent.

Each of our clients is given their own dedicated qualified accountant with unlimited access in person, telephone, or by email.

We pride ourselves on our client satisfaction and customer service and were awarded ‘Best Contractor Accountancy’ firm 2020 in The Contracting Awards and ‘Welwyn Hatfield Business of the Year 2019’ in the SME Hertfordshire awards.

To find out how we can help you please get in touch now.

Saving Tax: Marriage Tax Allowance

With the cost of living set to sky rocket over the next few months, here at PaperRocket, we are going to be dedicating a few of our weekly blogs to looking at ways to ensure that you are not missing out on any allowances that you may be entitled to, that could save you money in these testing times.

This week, we will be looking at the Marriage Tax Allowance. It is estimated that around 2.4 million qualifying couples miss out on claiming the marriage tax allowance, which could be costing them up to £252/year. Are you one of them?

What is the allowance, and who is entitled to claim?

This allowance is a way for couples to transfer a proportion of their personal allowance between themselves. So, if one member of the couple is a non-taxpayer and has some of their personal allowance left over after total income, that can be transferred to the other member.

You can only apply if you meet the following criteria:

  • You are married or in a civil partnership.
  • One of you needs to be a non tax payer, i.e. earning £12,570 or less (unless you have a tax code from HMRC stating your personal allowance is different).
  • The other person needs to be a basic rate tax payer, i.e. earning between £12,571 and £50,000. If the person is a higher or additional rate tax payer, you will not be able to claim.
  • Both need to have been born after 6th April 1935.
How does it work?

The amount that can be transferred is 10% of the total personal allowance (so £1,260 for 21/22). Even if the non tax payer earns nothing and doesn’t use any of their personal allowance, the maximum they can transfer is still £1,260.

The recipient will then have the transferred amount added on to their personal allowance. This means that if the full 10% is available to be transferred, a saving of £252 can be made (20% tax that would have been paid on that additional £1,260).

What if the non taxpayer earns more than £11,310?

If the non taxpayer doesn’t have the full £1,260 left to transfer (i.e. their income is between £11,311 and £12,570) then you can still claim. However, it’s a little more complicated as the full £1,260 needs to be transferred regardless, which in turn will mean that the non tax payer will then be pushed over the personal allowance and tax will become due on the amount that they’ve gone over. However, it’s still worth doing as overall, the total tax liability for the couple will still be reduced.

I’ve only just heard about this! Have I missed out on previous years?

The great news is that this can be backdated up to 4 tax years. So, if you make a claim now, and are entitled to the full 10% transfer for each year, you will receive £1,220 tax back (allowance for tax years 17/18, 18/19, 19/20 and 20/21). But, it is worth bearing in mind that you only have until 5th April 2022 to put in your claim to backdate the four years to include 17/18. As soon as we move into the new 22/23 tax year, you will only be able to backdate to 18/19, so best not to put it off!

How do I claim?

The easiest way to do so is online here, or you can do it over the phone with HMRC on 0300 200 3300. It will need to be the non taxpayer who makes the application (as it is their personal allowance that us being transferred). There is no cut off date to make the application in the tax year, and you don’t have to apply every year- it will transfer automatically until either of you cancels it.


PaperRocket Accounting provide accounting and tax services to professional contractors, freelancers, and small businesses working in the UK.

We offer our clients a flexible choice of fixed fee monthly packages which cover all of their accounting and tax needs (so no hidden costs or surprise bills!). All of our accounting packages include a monthly subscription for a cloud accounting software subscription provided by the awarding winning FreeAgent.

Each of our clients is given their own dedicated qualified accountant with unlimited access in person, telephone, or by email.

We pride ourselves on our client satisfaction and customer service and were awarded ‘Best Contractor Accountancy’ firm 2020 in The Contracting Awards and ‘Welwyn Hatfield Business of the Year 2019’ in the SME Hertfordshire awards.

To find out how we can help you please get in touch now.