Are you paying too much in National Insurance Contributions?

Are you paying too much in National Insurance Contributions?

Are you aware of how National Insurance contributions are calculated and collected – if you have more than one job or self-employment role?

Did you know that National Insurance contributions are collected separately for each employment and self-employment, but are subject to an annual cap. You may have exceeded the annual cap on National Insurance contributions and been completely unaware.

So, how would this have happened and what action should you take if you have overpaid?

Firstly, let’s put this into context and add some flesh to the bones…

Here’s an example of National Insurance Contributions Calculated:

Gemma had two forms of employment for 2016/2017. She earns £50,000 in one job and £30,000 in the other. She pays primary Class 1 contributions of £4,332.80 in respect of the job paying £50,000 per year (£43,000 – £8,060 @ 12%) + (£50,000 – £43,000 @ 2%). Gemma also pays contributions of £2,632.80 (£30,000 – £8,060 @ 12%) in respect of the job paying £30,000 per year.

Her total Class 1 liability in respect of both jobs is £6,965.60 (£4,332.80 + £2,632.80).

However, if Gemma had one job paying £80,000, she would pay Class 1 contributions of £4,932.80 (£43,000 – £8,060 @ 12%) plus (£80,000 – £43,000 @ 2%). This is £2,032.80 less than the combined contributions from the two jobs withe the same total earnings of £80,000. This is because spreading the earnings over more than one job results in more contributions being paid at the main rate of 12%.

Are You Paying Too Much In National Insurance Contributions?

While Directors have an annual earnings period, they may still pay contributions in excess of the annual maximum if they have more than one job.

If you have more than one employment and your total earnings exceed the upper earnings limit of £43,000 (per year 2016/2017), we can review your contributions for the next year in case you have already or will in future exceed the annual maximum.

So, thinking ahead…

If we know tbefore the start of the tax year that you have or will have more than one employment where the contributions payable will exceed the annual maximum, it is possible to apply for a deferment. This removes the need to pay contributions initially and then claim a refund after the end of the tax year.

The extent to which it is possible to apply for a deferment depends on the number of employments and the level of earnings achieved. If the earnings from job are at least to the upper earnings limit (set at £866 per week, £3,750 per month or £45,000 per year for 2017/2018), deferment is permitted in respect of any other jobs.

However, deferment is still possible if none of the jobs has earnings in excess of the upper earnings limit, but the earnings criteria is met.

Here’s an example for you:

Adam has three jobs in 2017 earning, respectively, £800 per week, £300 per week and £150 per week. The earning criteria is met in respect of the first 2 jobs, for which weekly earnings of £1,100 per week are more than the earning criteria of £1,023 per week. Deferment will then be permitted in respect of the third job in this case.

The Cash Flow Ups And Downs – and how to manage it

The Cash Flow Ups And Downs – and how to manage it

Cash Flow Ups and Downs and how to manage it successfully is something that all new businesses need to get to grips with first and foremost. Get to know your numbers. Get on top of your numbers. For many small business owners, this is not a task that is particularly appealing. After all, you didn’t start your own business to become an accountant – unless you started your own business as an accountant!

That being said – you still need to know your numbers, get to know your cash flow. Otherwise how will you keep a handle on money coming in and money going out?

You need to keep on top of your cash flow if you are serious about making a success of your business.

Sadly statistics show that many businesses fail within their 5 years of trading with almost half closing their doors in their first 12 months. But for those who keep going and are successful, they have their numbers under control – or make sure they are working with someone who has the numbers under control for their business.


Are Your Numbers Under Control? Scroll Down for More Information

Your accountant should be able to guide you in order to keep your cash flow under control or this could be a service that they can take control of for you and your business. This then allows you to focus on the core of your business – and more than likely the whole reason that you started your own business.

It’s not just down to keeping control of your financials but by doing so, you are more likely to exceed your own goals for sales and profit. This can in turn help you to grow your business further (or significantly expand) and create more opportunities for employment.

The businesses that we work with have received guidance on how to get control of their cash flow, how to know and own their numbers. And they’re achieving excellent results because of this.

So if you’re worried about your numbers – or have a lack of knowledge about how to get to grips with your cash flow, which is causing sleepless nights, worrying week to week about how you’re going to pay suppliers, overheads, your own personal bills, then you need to take action. NOW.

Oh and don’t worry, whatever your situation is, we’ve probably dealt with it before and as a refreshingly approachable business, we’re not scary to deal with. We genuinely have your best interests at heart and if we can help you turn things around for your business with regards to cash flow, then we all win!

Help And Guidance With Cash Flow Is Only One More Step Away

5 Technology Trends Set To Impact Accounting

5 Technology Trends Set To Impact Accounting

The 5 Technology Trends Set To Impact Accounting

The development in accounting software, online communication, mobility and the cloud, has changed the typical activities of an accountant. And these 5 Technology Trends Set To Impact Accounting.

There’s no doubt that the impact and pace of technology will only increase in the future too. The accountant of tomorrow may look very different to the accountant of today and that’s not to mention the technology that has still yet to be developed.

If we just look ahead a few years, we can start to see some of the impact that technology is likely to have on the accounting industry.

1. The Cloud

The Cloud - One of 5 Technology Trends Set To Impact Accounting - Maze Accountants
Many of today’s accountants already embrace the cloud and this is likely to continue to expand with a larger number of business operations and applications being hosted in the cloud. This continued expansion is being driven by cost, mobility, flexibility and simpler technical infrastructures.

There is also a greater choice in cloud platforms. Public cloud has naturally been the fastest growing cloud segment and, as we all know, is dominated by providers such as Amazon, Google and Microsoft. Public cloud services provided are standard and offered to many clients who all share the same or similar infrastructure.

This is the 1st of the 5 Technology Trends Set To Impact Accounting

2. Data Security

Data Security - 1 of the 4 Technology Trends Set to Impact Accounting - Maze Accountants
As accountants hold sensitive client data – as well as the increasing regulations around the security of customer data – maintaining data security will remain a priority and focus for accountancy firms.

The accounting industry needs to look at maintaining and improving procedures around data security, as well as keeping up with changing regulations in order to manage data security risks. A key element is assessing how critical information is stored – whether it’s in data centres or on site servers with regards to security, reliability and accessibility.

This is the 2nd of the 5 Technology Trends Set To Impact Accounting

3. Automation

Automation - One of the 5 Technology Trends Set To IMpact Accounting - Maze Accountants
Automation of processes has begun to reshape accounting and bookkeeping disciplines. The result of more business processes becoming automated will be improved productivity and efficiency, particularly in data collection and data processing.

Because of this, Accountants are starting to take more of a consultative role to clients, expanding to add value in new ways, such as, providing crucial financial and business advice.

Automation and Integration allows accountants to see more of their clients’ financials and financial activities. Whether it is information from integrated services from banks or cloud-based order processing, this additional super-fast data can help an accountant get a better picture of a client’s business and therefore deliver the best advice and solutions.

This is the 3rd of the 5 Technology Trends Set To Impact Accounting

4. Optical Character Recognition (OCR) Tools

OCR Tools - 1 of the 5 Technology Trends Set To Impact Accounting - Maze Accountants
OCR tools have been around for quite some time, allowing people to easily scan and upload receipts using their mobile device straight to accounting software. As these benefits become more widely adopted, this technology will become more of a mainstream client process.

Accountants have been leaning towards paperless processes for some time, and this is the next step within that process. The benefit is it results in less human error, with records that are easily filed, stored and searched, and less time spent on data entry and an overall, more efficient practise.

This is the 4th of the 5 Technology Trends Set To Impact Accounting

5. Blockchain Technology

Blockchain Technology - 1 of the 5 Technology Trends Set to Impact Accounting - Maze Accountants
There are still many who are not familiar with Blockchain Technology but this recently launched technology shows promising potential for the accounting industry. it will enable sharing of a common infrastructure for database retention.

Instead of companies keeping and reconciling records of the same transaction in their separate ledgers, both sides of the transaction can be recorded simultaneously in a shared ledger. Again, it’s a process that is less prone to human error and fraudulent behaviour as it makes falsifying or destroying financial records practically impossible, which is good news.

The benefits include standard and increased auditing efficiency, allowing auditors to automatically verify a large portion of the most important data relating to financial statements.

While technology’s disruption to the accounting practice may not be as advanced as in other industries, its future impact cannot be avoided. These are just some of the ways technology is likely to impact the accounting industry.

And it will certainly be an important space to keep an eye on. So these are the 5 Technology Trends Set To Impact Accounting.

Want to know how to integrate these technologies in your business?

Do I Need An Accountant? Check This First

Do I Need An Accountant? Check This First

Do I need an accountant?

Okay, so in many domestic situations you may be able to turn your hand to a number of things – like painting/decorating, carpentry, putting up shelves, a spot of plumbing. But when it comes to running your own business, you may well ask “Do I need an accountant?” especially if you are fairly competent with the requirements for submitting your accounts. Even with the advanced accounting software available online…

However, there is a reason why professionals are still around. Accountants, similar to solicitors and skilled tradesmen, are always in demand. So, in all fairness – do you actually need an accountant? The answer is, more than likely “Yes”.

While it is true that clients can save themselves money by doing some of the accountancy functions themselves, they (unless they are a qualified accountant) will always inevitably require some professional financial advice when running a business, whether that is as a sole trader or a limited company.

Need an Accountant for Tax Purposes?

The UK has one of the most complex tax systems in the world and it would be a remarkable individual who could keep on top of all the tax obligations and available opt outs that are imposed each year let alone running their own skilled business. This is one of the most pressing reasons why it is always prudent to consult with an accountant over your tax affairs; they are very easy to get wrong, and getting your tax affairs wrong can be stressful, costly and, potentially, legally problematic.

Consulting an accountant will not just ensure that your business affairs are compliant with tax laws; a good accountant will also advise you on how to legally structure your business affairs to minimise your tax burden and will also monitor the appropriate tax systems for any change that could either disadvantage your business or provide it with an opportunity.

Also, while many accountancy functions can now be undertaken directly by an accountant’s client, it is always good to have a second (professional) pair of eyes to ensure that your books are indeed in order. You may no longer want or need to pay your accountant to do your bookkeeping for you, but you will want them to check that you have been doing it correctly by yourself or to guide you in the right direction.

A good accountant also acts as a good platform for professional aspirations and intentions. An accountant can constructively interrogate your business plan for you, to ensure that the figures and the financial forecasts within it add up and make sense. If you also want to monitor your monthly cash flow and project forecasted earnings, an accountant can help with that.

It is therefore wrong to view your accountant just as the person in the middle between you/your business and HMRC. Accountants can help you to deal and communicate with a wide range of bodies and organisations.

When choosing an accountant or accountancy firm, you may want to do so according to specialisation or sector. If you are intending to work within a particular industry or business-type, the chances are that there are accountants who specialise in dealing with businesses in that field.

Although any good accountant will be able to cover all the basics that you require to run a business, a specialist will be able to advise from an experienced and knowledgeable perspective, often making suggestions that your ‘average’ accountant would not make. Such an accountant will also be able to offer some professional comparisons on how other businesses in your field are constituted and how they are performing.

So, do you need an accountant?

However, the true value of an accountant is that they share some of the strains and stresses that are inevitably involved with running a business, especially small ones. There are already enough things to do in keeping a business going, and there never seems to be enough time to do everything that needs to be done. Hiring an accountant eases this burden considerably.

Legally, you are under no obligation to hire an accountant to manage your tax affairs. However, you are legally expected to submit a complete and accurate set of accounts to the taxman, and there is no better way of ensuring that you do this than by employing a professional accountant to do this for you.

Do I Need An Accountant? Learn How We Can Help With Your Business

To find out how we can help you for as much input as you want, click the button below.

(We may advise that you need more help but it’s your choice!)


Maze Accountants Chessington


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Income Shifting & How To Benefit From It

Income Shifting & How To Benefit From It

Income Shifting

How to benefit from Income Shifting or shifting your Tax Liability the easy way…

Special rules apply to income received from assets which are jointly owned by married couples. They allow them to vary the share of income on which each pays tax. So how can we use these rules to create tax savings for our clients?

It is quite shocking to think that until 1990 a married woman’s income belonged to her husband for tax purposes. Can you believe it was even necessary for HMRC to obtain a husband’s permission to refund his wife any tax that she had overpaid. Times have changed and while this antiquated system has been scrapped, some aspects remain, but the good news is that these tend to owrk in favour of married couples.

Whether or not you are married, they (and no one else) are liable to tax on the income to which they’re entitled. What’s more, anti-avoidance rules prevent them from transferring income for tax purposes to their spouse in order to save tax. However, a tax break, which is a throw-back to the pre-1990 system, allows couples to shift the liability between themselves and achieve a tax reduction.

The 50/50 Tax Rule

The 50/50 tax rule for married couples can save tax without the need for a form 17 election.

Tip: Consider transferring a small share of an asset into the spouse’s name if they pay tax at a lower rate.

Example: in 2016/2017 Amanda’s shareholdings pay her dividends of £18,000. Her other income is £32,000. Tax at the higher rate kicks in on income over £42,000, and so applies to £8,000 of Amanda’s dividends. Her Husband, James, has an income of £30,000. So Amanda converts each shareholding to jointly owned by transferring 5% to James. They make no Form 17 election. They are each taxable on 50% of the dividends, i.e. £9,000 each, which means that Amanda is no longer liable to higher rate tax and neither is James.


Need Help With Income Shifting

If you need any help or guidance with Income Shifting and how you can make the most from it, please feel free to contact Maze Accountants on 020 8643 9633.

Form 17 Conditions

A Form 17 can be used by a married couple to elect to be taxed on income they receive from a jointly owned asset according to the proportions in which they own it. After the form has been completed, signed and dated, it must be submitted to HMRC within 60 days.

The form cannot be used for:

  • income to which neither you nor your partner is beneficially entitled
  • partnership income
  • income from commercial letting of furnished holiday accommodation
  • income from shares in a close company (broadly that’s a company controlled by five or fewer individuals)
  • income which for tax purposes is treated as income of a third party
  • property held as beneficial joint tenants, i.e. where you are both jointly entitled to the whole of the property and income.
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