As a business owner, managing your responsibilities towards your employees goes beyond just payroll. Maximizing the benefits of various tax schemes can lead to improved employee morale, optimized finances, and streamlined operations. In this fourth instalment of our Tax Tips Series, we delve into a comprehensive range of employer tax tips that can elevate your business while keeping your workforce content. Let’s explore these expert insights to make the most of your employee-related tax opportunities.

employer tax tips
Photo by Jonathan Borba

1. Encourage Creativity with Staff Suggestion Scheme

Boost employee engagement by implementing a staff suggestion scheme. Recognize and reward innovative ideas with tax-free payments up to £5,000, fostering a culture of continuous improvement.

2. Reward Loyalty with Long Service Awards

Celebrate your long-serving employees with tax-free long service awards. For every year an employee has dedicated over two decades to your business, you can provide them with a tax-free award worth £50 for each year of service, enhancing their dedication.

3. Streamline PAYE Payments

Manage cash flow efficiently by opting for quarterly PAYE payments if your monthly payments to the revenue are below £1,500. This tactic can provide a timely financial advantage.

4. Self-Employment Classification

Ensure correct classification of self-employed workers. Misclassification can result in substantial financial liabilities, making it imperative to assess employment status accurately.

5. Efficient New Employee Onboarding

When hiring new employees, prioritize accurate tax allocation by obtaining a P45 or completed Starter Checklist from HMRC. This crucial step ensures accurate tax allowances and deductions, particularly vital for part-time or family employees.

6. Professional Subscriptions Relief

Support your employees’ professional growth by allowing them to claim tax relief on approved professional organization subscriptions. Alternatively, you can pay these subscriptions directly on their behalf.

7. Smart Bonus Timing

Optimize your National Insurance contributions by considering half-yearly or yearly bonus payments instead of monthly, offering potential savings (except for directors).

8. Benefits of Company Pension Contributions

Both you and your company can save on National Insurance contributions by contributing to a registered pension scheme for yourself instead of making contributions from your net income.

9. Relocation Expenses Assistance

Attract new employees by offering to pay their relocation expenses. The first £8,000 provided for a move is tax-free, provided valid receipts are provided.

10. Tax-Free Termination Payments

In specific circumstances, tax-free termination payments of up to £30,000 can be made when ending an employment contract, presenting a valuable financial option.

11. Empower with Approved Share Schemes

Encourage employee engagement by creating approved share schemes. This allows employees to buy company shares at favorable prices, fostering alignment and financial benefits.

12. Strategic Vehicle Ownership

Evaluate vehicle ownership strategies to minimize tax implications. Determine whether personal or company ownership of business vehicles is more tax-efficient based on factors like usage and type.

13. Mileage Allowance Shortfall Relief

If an employee’s mileage allowance falls short of approved rates, they can claim tax relief on the difference, supporting their business-related travel.

14. P11D Compliance for Benefits

Meet HMRC compliance by submitting P11D forms for benefits in kind and expenses by the 6th of July annually, ensuring accurate records and avoiding penalties.

15. Interest-Free Employee Loans

Support employees with interest-free loans of up to £10,000 without triggering a benefit in kind assessment. Directors and shareholders may need to repay loans to avoid the company being taxed on the loan.

16. Eye Tests and Computer Lenses

Enhance employee well-being by covering eye tests and lenses for those using computers extensively, without incurring tax liability for them.

17. Tax-Free Bicycles for Commuting

Promote eco-friendly commutes by providing tax-free bicycles and safety equipment, encouraging a healthy and sustainable lifestyle for your employees.

18. Thoughtful Trivial Gifts

Gifts are one of the easiest but often missed employer tax tips. Share festive spirit with tax-free trivial gifts, like a Christmas turkey, to show appreciation without triggering tax liabilities. Trivial non-cash gifts costing the employer £50 or less are tax-free. These are limited to 6 per tax year for directors.

19. Annual Medical Check-Ups

One of the most misunderstood employer tax tips is that medical insurance is tax free. While the employer gets tax relief on the cost, it is not tax-free for the employee. However, you could prioritize employee health with tax-deductible annual medical check-ups, offering financial benefits for both the business and employees.

20. Efficient Works Bus Services

Support your employees’ transportation needs by providing works buses or subsidizing local bus services, benefiting both convenience and morale.

21. Carpooling Incentives

Encourage carpooling among employees by rewarding drivers with a tax-free 5p per mile for each fellow employee they transport, promoting sustainable transportation.

22. Tax-Free Mobile Phones

Enhance employee connectivity with tax-free mobile phones. As long as the company owns the contract and handset, employees can enjoy tax-free private usage. One phone is allowed per employee.

23. Festive Celebrations

Show appreciation for your employees with tax-free annual parties or events. When the cost per head remains under £150, employees can enjoy the festivities without tax implications.

24. Claim The £5k Employment Allowance

Certain employers don’t have to pay the first £5,000 of Employer’s National Insurance Contributions (NIC). However, it has to be claimed by submitting a payroll report to HMRC. It can’t be claimed by larger employers or if the only employee earning over £9,100pa is a sole director.

By integrating these carefully crafted employer tax tips into your business approach, you can foster a positive workplace culture, boost employee satisfaction, and optimize financial efficiency. Each strategy addresses unique facets of your employer-employee relationship, ensuring compliance while maximizing available tax benefits. This Employment Tax Tips article concludes our Tax Tips Series, which also covered Business Tax, Personal Tax, and VAT.

There’s a new PAYE Direct Debit scheme being launched on 3rd October 2022. So finally, there will be an easy way to pay PAYE/NIC to HMRC. No more hunting around for the monthly PAYE bill and payment reference. Just set up the PAYE direct debit, then let your payroll software and HMRC do the rest. Plus, you get a few more days to pay it and there should be no interest charged. Read on below for how to set up the new Direct Debit.

New PAYE Direct Debit

Isn’t there already a Direct Debit for PAYE?

There is already a direct debit for PAYE but you can only set it up for a single payment, and you have to enter the amount and the payments reference. So it’s pretty useless! We’ve been submitting payroll online for nearly 10 years now, so it’s about time HMRC improved this facility. Finally the new direct debit for PAYE is almost here.

How much will be included in the New Direct Debit

Once you’ve set up the new direct debit, HMRC will collect amounts based on the following reports submitted to them:

If there is a credit on your PAYE account, allocated to the most recent month, it will reduce the amount payable via direct debit.

Three days before the direct debit is due, HMRC will send a notification of the amount it will take.

When will the Direct Debit for PAYE be taken?

Usually the PAYE/NIC owed for a tax month (ending on the 5th every month) is due by the 22nd of the same month. Or the nearest working day before the 22nd if the 22nd isn’t a working day. If you pay by cheque, make that the 19th. However, the new direct debit for PAYE will be taken on the 23rd, or later if the 23rd isn’t a working day. No interest will be charged if the direct debit is successfully taken first time.

How to Set up a New PAYE Direct Debit

There are a couple of things to know before you set up a new PAYE direct debit.

So if all of the above is ok, here is what you need to do to set up a new direct debit:

Method A

  1. Log into your HMRC Account
  2. Go to your PAYE Service
  3. Click Set up a Direct Debit
  4. Follow the HMRC instructions

Method B

  1. Go to the general Pay Employers’ PAYE page
  2. Click on Direct Debit
  3. Follow the HMRC instructions
  4. Log into your HMRC account when instructed.

Help with Payroll

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Are you paying casual workers this summer? Perhaps you are paying piece-rates for the amount of produce picked or packed by each person. Reporting such small and variable payments under the new RTI system is a significant hassle.

The RTI rules require you to report each payment to workers, including paying casual workers, on or before the date of the payment. Fortunately you may be able to use one of these two concessions to ease your RTI reporting burden:

a) Where you are  paying casual workers daily or more than once a week, but the amounts paid are less than £109 per person per week, you can send RTI reports to HMRC weekly; or

b) Where the total number of your employees, including casual workers, is less than 50, you can send your RTI reports to HMRC on a monthly basis.

Concession b) will only apply for payments to employees made before 6 April 2014.

Your casual workers are likely to have no set working hours for each week. In effect they will be on a zero hours contract; paid for the hours they work, but otherwise not at all. In such cases you should choose option D of hours worked on the FPS report under RTI.

The Government wants employers to report data on the hours worked by employees in order to prevent fraud in the Tax Credits system. Under Universal Credit the hours worked will not be relevant to the employee’s claim, so in time when all claimants are moved from Tax Credits to Universal Credit, the requirement to report hours worked should be dropped.

We can do your payroll for you so you can let us worry about when to submit RTI reports when paying casual workers. Get an instant quote for our payroll services using the button below.

Newsletter issue – August 2013. Sign up now for your copy and receive free tax saving reports.