As we’re approaching the 2014/15 tax year end, there are a number of important changes you should be aware of which will have impact on your company, and several actions you need to perform.
Summary of actions
- Consider drawing a dividend before 5th April to maximise your tax allowances
- Consider topping up your pension before 5th April to maximise your tax allowances
- Consider increasing your salary from 6th April to take advantage of larger tax allowances
- Notify your accountant if you need to make a specific declaration for your PAYE scheme
- Notify your accountant if you have received a personal benefit in kind from your company: they can complete a P11D for you
- Start collecting interest, dividend and income statements for your 2014/15 Self Assessment Tax Return
Maximise your dividends to minimise tax
Now is the perfect time to draw dividends in order to take advantage of the 2014/15 tax allowances: the majority of employees can draw up to £41,865 per year via salaries and dividends before paying higher rate tax. If you want to take advantage of your allowances simply draw a dividend before 5th April 2015; use our handy tax calculator to see how much you can draw before paying higher rate tax. If you’re using inniAccounts, you can see these calculations on the dividend page.
Update yours and your employees’ salaries
The Chancellor has announced that from April 6th 2015:
- For the majority of employees, the personal tax-free allowance is increasing by £600 to £10,600 per year (however they will pay higher rate tax on total earnings above £42,385)
- The annual threshold at which National Insurance is due has increased by £156 for Employer’s NI (to £8,112 per year) and £104 for Employee’s NI (to £8,060 per year). This means that Employee’s and Employer’s NIC thresholds are no longer aligned.
How this impacts you and your employees
To take advantage of the higher personal tax-free allowance, you need to check and update the salaries for you and your employees on or after 6th April 2015.
inniAccounts has been updated to include the new rates, and on 6th April we will update each employee’s tax code to allow them to benefit from the increased tax-free personal allowance.
If you or your employees currently have a salary of between £9,900 and £10,500 we will increase this by £600 on 6th April. Other employee salaries will remain unchanged.
As an accountancy firm, we are required to make an end of year submission to HMRC with the final details of payments made to your employees. During this process you are required to make a declaration, which your accountant could submit on your behalf. In inniAccounts, we will assume the following when making your declaration:
- Your PAYE scheme is still operating
- You have not made any ‘free of tax’ payments
- Nobody else has paid expenses or benefits to your employees
- You have not employed anyone employed by a person or company outside the UK who worked for you in the UK for 30 or more days in a row
- You have not paid your employee’s salaries directly to a third party, for example, paying school fees
If your circumstances differ from the above please contact your account manager before 6th April 2015.
Shortly after the new tax year start it will be time for your annual PAYE return and, if required, P11D for you and your employees. If you or your employees have personally enjoyed the benefit of something paid for by your company then a P11D must be prepared and additional National Insurance paid. Examples of such benefits include:
- Medical insurance / treatment
- Gym membership
- Company car
- A loan to a director over £10,000
- Relocation expenses in excess of £8,000
How this impacts you and your employees
Any benefits in kind must be declared on a form P11D. The company must then pay class 1A National Insurance (13.8%) on the value of the benefit. In addition, the employee’s tax code will be adjusted and additional income tax will be deducted from the employee’s salary.
The majority of employees will not need a P11D, but if a P11D is required we can prepare and file it for you at a cost of £95+vat per employee. If you’re a client, you will shortly be prompted after logging in to tell us if you’d like us to prepare a P11D.
Self Assessment Tax Returns
Now is a great time to get ahead with your 2014/15 return. Over the following months you may be receiving interest statements from banks, or dividend vouchers from investments: please make sure you put this information safely to one side as it’s required in order to prepare your tax return. If you’re using inniAccounts, when you log in after 6th April 2015 you’ll be able to notify us if you would like us to complete your tax return for you.
Visit our Knowledge Hub and find more information about the actions to take at the end of the 2014/15 tax year.
If you’ve already completed the steps in this guide and followed the advice from your accountant to optimise your tax affairs, here’s our selection of more tax tips for your business: