Any accountant armed with a calculator, a grey suit and an internet connection can tell you all the boring financial rule changes about to click into law this month.
But what do they really mean for your business – and what do you need to do about them? Here’s our straight-talking, jargon-free guide to the real nouse behind the numbers.
National insurance
From Wednesday 6 April, national insurance (NI) is going up. In practical terms, your payroll software will be all over this – but there’s an interesting opportunity here.
The smart move: Salary exchange is a neat approach that encourages your team to save for the future by increasing their pension contributions. At the same time, it reduces the amount of employer’s NI contributions you need to pay. In effect, it creates a more attractive employment package, increases staff retention and cuts employment costs. Sounds too good to be true? Nope – it’s perfectly legitimate tax planning.
So how does it work? Step one is to ask your team if they’d like to reduce the amount of salary they take home and instead, increase the amount of pension contributions you make on their behalf.
They earn the same amount but the balance between their income and pension has changed. You’ll need to alter their employment contracts to create the proper legal basis for the change.
Your employer’s NI contributions go down because they’re calculated on the salary you pay, not on employer’s pension contributions. With the new rates, for every £100 you switch from salary to pension your business will save £15.30 in reduced NI. And now the chancellor has announced NI rates are to increase by 1.25%, you’re set to save even more.
Focusing on the long term is good for financial and mental health all round. You could even offer to share the NI savings you’ll make when they switch, so they could end up earning more.
To paint a possible picture: for every £1,000 that Jill puts into her pension, you save £153. Offer to go (say) halves and Jill gets an extra £76 on that £1,000. You save money, Jill gets a pay rise AND gets more in her pension. On top of that, Jill would save on her own employee contributions. Win, win, win!
Get in touch to chat through how salary exchange could work for your business.
Minimum wage
Minimum and living wage rates go up on Friday 1 April. You’ll find all the info on the government website.
The smart move: Stay the right side of the law – and keep your staff smiling – by making sure your payroll team are ready for the rises.
Basic rate dividend tax
Personal tax bands are on their way up too. In the 2022-23 tax year, you’ll pay more tax on any dividends you earn.
The smart move: The smart move will have to be a fast move! It won’t affect everyone but if you get paid in a mixture of dividend and salary, you’ll save tax if you pay yourself any dividend in the current tax year, before Wednesday 6 April.
Employment allowance
In the latest spring statement, Chancellor Rishi Sunak announced that, from Wednesday 6 April this year, the Employment Allowance will be increased by £1,000, from £4,000 to £5,000.
The smart move: Make sure you get your extra £1,000 employers’ National Insurance relief by adjusting your payroll in good time. Contact us for payroll advice if there’s anything you’re not sure about.
Corporation tax
To make up for the previous tip being a bit last-minute, we’re giving you a fair bit of time for this one. From next year (1 April 2023), corporation tax rockets up from its current low of 19% to a hefty 25%. Mind you, to muddy the waters, they’re also introducing a small company rate, so businesses who make less than £50,000 profit will carry on paying the lower rate.
The smart move: The rates are the rates but if you own multiple companies, you might be able to save yourself a few quid here. Get in touch: we’ll take a close look and let you know if you’ll be better off streamlining the number of businesses you run.
ISAs
Relax – no changes here. But just a reminder that the ISA deadline is Tuesday 5 April.
The smart move: Make sure you’ve made the most of your ISA and invested the full amount before the deadline.
Coronavirus Job Retention Scheme (furlough)
Not a specific one for April, but it’s certainly a hot topic. HMRC is tightening up on compliance around the furlough scheme (CJRS).
The smart move: If you’ve had the ‘pleasure’ of receiving a letter about your CJRS, asking questions and possibly mentioning a review, it might have made you nervous, even if you know you applied for the scheme in good faith. Even if you haven’t had a letter, but you’re feeling anxious, get in touch. We’ll talk you through all the details and make sure you can sleep soundly again.
Cryptocurrency
Another area that’s shot to the top of HMRC’s agenda is cryptocurrency. The number crunchers in the tax office wrote to 10,000 tax payers last year, reminding them that gains on crypto are taxable. How did they know who to target? Something called ‘blockchain forensics’. The short version: they know more than you might think.
The smart move: Come and talk to us. We’ll advise you on where and how you need to declare this on your next tax return.