Saturday, 18 October 2014

Saving on you company's auto-enrolement contributions

Pensions auto-enrolment is now starting to bite smaller businesses. Many face the prospect of paying into their workers pensions for the first time. When your company's time comes how can you keep the lid on contributions.

The auto-enrolment start date for smaller employers (those with fewer than 30 staff) is nearing. The Pensions Regulator recommended that some companies should have started preparing in June 2014 which is a full year before the start date. The later you leave it the less time you have to work out the finer details and this could mean paying more in staff contributions that you need to.

Most of the information you'll read on auto-enrolment tell's you that employer contributions start at a minimum of 1% of your employees' qualifying earnings (QE), increase to 2% after a year and then 3% after another year.

QE means all pay between the NI lower and upper limits. For 2014/15 that's £5,772 to £41,865. So for example your company's contributions for an employee earning £20,772 per year would be a percentage of  £15,000 (£20,772-£5,772).

The auto-enrolment rules allow you to pay contributions on three different amounts of earnings rather than your employees' QE. These are called earning sets. See for further guidance

Depending on how you pay your workers, e.g. basic pay only, basic plus overtime, basic plus bonus etc., and how generous you want to be, you can choose to work out your company's contributions using QEs or any of the three sets. The three sets are:

  • Set 1 - 4% of basic salary
  • Set 2 - 3% of 85% of total remuneration
  • Set 3 - 3% of total remuneration.

 You can use varying methods for different groups of employees; sales staff, directors, etc. Work out the most cost-effective option ahead of your auto-enrolment start date.

Sets can also be changed. You are not stuck with your initial choice if you later find that a different set would be more suitable or cost effective.

Therefore some serious bean counting is called for but the costs or savings can be significant.

Monday, 13 October 2014

New HMRC power to remove funds from taxpayers' bank accounts

The government intends to beef up HMRC's powers to recover tax debts directly from taxpayers' bank and building society accounts, including ISAs. The new measure will apply, to taxpayers who owe at least £1,000 and have been requested on several occasions by HMRC to pay. A minimum aggregate balance of £5,000 will have to be left across all of the taxpayers' accounts. including ISAs, after the debt has been recovered. Consultation on the implementation of this measure is ongoing.

Please sign up to my blog to be kept up to date with this very important matter.

Also be aware that HMRC is prone to "mistakes" and once he has obtained your money by fair means or foul it could be the devils own job to get the money back.

Obviously to prevent this happening please ensure that all tax is paid in good time or ensure that your bank balances do not hold funds of more than £5,000 across all the accounts.

I very much doubt that HMRC can touch funds that are held jointly with your spouse of partner.