PaperRocket

A Guide to Funding Summer Holiday Childcare for Company Directors and Sole Traders

22/05/2023 by PaperRocket

As the summer holidays are just around the corner, many parents find themselves juggling their professional responsibilities with arranging childcare. If you’re a director of a limited company or a sole trader, you might be wondering how to manage these costs effectively. Fortunately, there are options available to help fund summer holiday childcare which we explore further below.

Salary Sacrifice Schemes

Primarily aimed at employees, including directors of limited companies, salary sacrifice schemes allow individuals to give up part of their pre-tax salary in exchange for childcare vouchers. This effectively reduces your taxable income, and you could save on both income tax and National Insurance Contributions (NICs).

Please remember, though, the Childcare Voucher scheme closed to new entrants in October 2018. If you were part of the scheme before this date, you could continue to benefit from it as long as you don’t change employers, and your employer continues the scheme.

Tax-Free Childcare

Replacing the old Childcare Voucher scheme is the Tax-Free Childcare initiative, a government-funded program that boosts your childcare payments by 20%. For every £8 you pay into an online account, the government will add an extra £2, up to a maximum of £2000 per child per year, or £4000 for a disabled child.

As a director of a limited company or a sole trader, you are eligible for this scheme. However, to qualify, your child must be 11 or under and usually live with you. They stop being eligible on 1st September after their 11th birthday.

Working Tax Credit

Sole traders might also consider the Working Tax Credit. This is a state benefit given to workers who earn a low income. If you’re responsible for at least one child, you may qualify for the ‘childcare element’ of Working Tax Credit, which provides assistance with childcare costs.

Whether you’re a company director or a sole trader, you have a variety of options for funding summer holiday childcare but it’s always a good idea to consult with an accountant to understand which option best fits your circumstances. The best choice will be one that benefits both your family and your business. With the right childcare sorted, you can enjoy the upcoming summer knowing that your children are in good hands while you work.

PaperRocket are a multi award winning accounting practice, and Accredited FreeAgent Practitioners.

We specialise in providing friendly, non-accounting jargon, services for contractors, freelancers, sole traders, and landlords across the UK.

Our fixed fee monthly accounting packages all include a FreeAgent subscription as standard and unlimited support from your allocated accountant.

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

What You Need To Know About P11ds

24/04/2023 by PaperRocket

Whilst the 2022/23 tax year may have recently ended, the filing obligations for it continue, not only with personal tax returns for the year, but also with the filing of 2022/23 P11ds. But, what are P11ds, and do you need to complete one?

What is a P11d?

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

What are Benefits in Kind and do I need to file a P11d?

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

If you’re an employer with a PAYE scheme open, then you most likely will need to file a P11d. 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 14.53% (thank the introduction and the reversal part way through the tax year of the Health and Social Care Levy for that odd percentage! Going forward, the rate will return to 13.8% from 23/24). However, what this 14.53% 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 (6^th April – 5^th April). All P11ds must be filed by 6^th July following the end of the tax year. Any payment due must reach HMRC by the 22^nd July (19^th July if paying by cheque). The deadline for filing the 22/23 P11d is 6^th July 2023. 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.

Do I need to include Trivial Benefits on the return?

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 are a multi award winning accounting practice, and Accredited FreeAgent Practitioners.

PaperRocket Accounting Shortlisted For The 4th Year Running At The Contracting Awards

05/04/2023 by PaperRocket

We are very proud to announce that, for the fourth year running, PaperRocket has been shortlisted as ‘Best Contractor Accountancy (<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, PaperRocket won this hard-fought category, and we are over the moon to be shortlisted again.

Sarah Solo, director of PaperRocket Accounting says “It’s an amazing honour to be shortlisted for such a prestige award once again and we are keeping our fingers crossed for a win for the second time!”

The awards event will be held on 22^nd June 2023 in London.

PaperRocket are a multi award winning accounting practice, and Accredited FreeAgent Practitioners.

Budget 2023

15/03/2023 by PaperRocket

After the last few years, with Covid and Growth Plans, and then Growth Plans reversed, statements from the Chancellor have tended to be rather dramatic, whether that be announcing covid support schemes, IR35 reforms, or just generally plunging the markets into chaos!

However, after Chancellor Jeremy Hunt delivered his 2023 Budget today, it seems as though we have returned to the days of Budgets being relatively unremarkable. So, let’s have a look at some of the few measures introduced that may affect you and your business:

Corporation Tax

It was confirmed that corporation tax will still be increasing from April 2023, with the main rate rising from 19% to 25%. However, it is worth pointing out that it is only companies with profits over £250,000. If your profits are less than £50,000 for the year, the corporation tax rate will remain at 19%.

For profits between £50k and £250k, a system of marginal relief will apply, meaning that you will pay tax on an increasing level dependent on whereabouts your profits fall in between that margin.

It was announced that the Capital Allowances Super Deduction (due to end on 31^st March 2023) would be replaced by a Full Capital Expenses Allowance which would allow larger companies to expense the full amount of their capital expenditure for corporation tax purposes for the next 3 years.

Pensions

It was announced that the tax free annual pension allowance would increase for the first time in 9 years from £40,000 to £60,000.

The pension lifetime allowance is to be abolished. Currently, there is a limit of £1,073,100 that can be held in pension pots before additional tax is chargeable. This limit is to be scrapped.

Childcare

From April 2024, on a gradual basis, the current 30 hours/week free childcare currently offered to 3 and 4 year olds will be extended to include children from 9 months and up in England. This will be introduced gradually, with an aim to have it fully rolled out by September 2025.

Other Measures

The Energy Price Guarantee is to be kept at £2,500 for an additional 3 months, until the end of June 2023.
Road fuel duty has been frozen and the 5p cut in petrol and diesel duty has also been extended for 12 months.
From August, alcohol taxes in pubs will be 11p in the pound lower than the rate in supermarkets.

PaperRocket are a multi award winning accounting practice, and Accredited FreeAgent Practitioners.

The Countdown To 2023/24 Is On

02/03/2023 by PaperRocket

As we enter March, we are all hoping it will soon be time to say goodbye to dark mornings and icy windscreens! But something we will also be saying goodbye to is the 2022/23 tax year, as 2023/24 rapidly approaches on 6^th April.

So, with 2022/23 on it’s way out, it is time to take a look at whether you have utilised all of the 22/23 allowances available to you because, for the most part, once the year has gone, so have the allowances!

Dividend allowance

In the 22/23 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 8.75%, 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.

This tax free allowance is due to be cut down to £1,000 in the 23/24 tax year.

Capital Gains Allowance

Any investment or funds including 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 22/23 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.

This tax free allowance is due to be cut down to £6,000 in the 23/24 tax year.

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.

Any interest received within these thresholds will be tax free, but, if you do receive interest in excess of these amounts, then it may be worth investing and making use of your ISA allowance for the year, which for 22/23 is £20,000. This allowance can be split between the various types of ISAs, cash ISAs, stocks and shares ISAs, Lifetime ISAs etc.

Another thing to bear in mind with the Lifetime ISA is that 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, extending your basic rate tax band, which in turn will mean that more of your income will be taxed at the lower rate (the same goes for any charitable donations you may make in 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 are a multi award winning accounting practice, and Accredited FreeAgent Practitioners.