Workplace pensions – Automatic enrolment!

‘The law on workplace pensions has changed. Under the Pensions Act 2008, every employer in the UK has a duty to put certain staff into a pension scheme and contribute towards it. This is called 'Automatic Enrolment'.

You may be a hairdresser, an architect or employ a personal care assistant, but if you employ at least one person you are an employer and you have certain legal duties.

The chart below shows that nearly half a million small businesses will need to arrange their pension scheme this year!

The Pension Regulator has issued 6,746 compliance, unpaid contributions notices and fines to date and 3,732 in the period October to December 2015!  Don’t be one of them - fines start at £400 and can be £50 daily for non- compliance!

So small business owners need to:

• establish a qualifying work place pension scheme,
• ensure the scheme has an appropriate default fund,
• issue statutory communications to all employees and
• enrol all eligible jobholders into the scheme.

Do you have the time to do all this and run your business?

Ask yourself “How do I choose the right pension scheme, is my payroll Auto Enrolment compliant, how are you going to tell your pension scheme what to collect and where to allocate contributions?”  If you’ve not done anything about preparing for Automatic Enrolment, talk to us; we can help you with our fully compliant payroll, workforce assessment and pension selection processes and help you avoid the wrath of the Regulator and get on with what matters most - Making your business a success!”

Will pension tax relief change again on budget day?

There has been a lot of speculation that the Chancellor may announce further major changes to tax relief on pension contributions in his March Budget, based on consultations with the pensions industry.  Under the current rules an individual’s contributions can save them tax at their highest marginal rate and also help them avoid losing their personal allowance (see above). So a £8,000 pension contribution by a higher rate taxpayer results in £2,000 (20%) being added to their fund by HMRC = £10,000 gross. The £10,000 gross contribution would then save a further £2,000 in tax, so the net cost would be just £6,000 if they are a higher rate tax payer.

It is understood that the Government is considering introducing a flat rate of pension tax relief of between 25% and 33%, which would be good news for basic rate taxpayers, but higher rate taxpayers would lose out. If say a 30% rate of relief was to be introduced, a £7,000 contribution would be topped up to £10,000 with no further relief.  It has also been suggested that it may not be possible in future to agree with your employer to sacrifice part of your salary in exchange for an additional tax free employer pension contribution. The starting date of these possible changes is uncertain but they may be effective from Budget Day!

Contact us for all your Tax & Accounting needs!
☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com 

Business Process Outsourcing - Yes or No?

Are you looking to outsource any of your business's processes? Read this before making a decision.

Social selling 

Outsourcing is not just a strategic option for large international corporations, small and medium sized firms can benefit too from the efficiency, functionality and cost savings of outsourcing. Outsourcing simply means "contracting out" various functions of your business. A common misconception is that outsourcing is always done overseas. Moving your IT help desk to India can save a lot of money, but there are many providers in the UK that can provide an IT help desk that is cheaper than having an in-house support function.

Cost Savings

By outsourcing functions that were previously performed in-house, businesses can reduce their employee levels and related costs such as recruitment, salaries and benefits. By outsourcing a capital intensive function, you can also reduce the costs of equipment obsolescence and depreciation.

Quality of Service

Because your firm is the outsourcer's customer, they will want to keep you happy. You can therefore benefit from a more “can-do” approach, which may not always be what you get from an in-house team.

State-of-the-art Technology

Outsourcers have to spend time and money on the most up to date equipment and on employee training to remain competitive. By outsourcing certain areas like website hosting, virtual desktops, social media or email, you are ensuring that your firm will always have access to the latest technology platforms. Taking IT as an example, an outsourcer is likely to have more up to date technology such as the latest servers and software.

Price Stability

By signing a contract to outsource, you will be able to lock the supplier in to a pricing agreement. This gives the business certainty in terms of costs. As a result, the firm will be able to budget operating expenses and capital purchases more accurately, while reducing the likelihood of unforeseen costs.

More Time to Focus on Core Business Activities

If your firm is to be successful and profitable, the management team needs to spend time planning and directing the company's business strategy and not wasting time worrying about managing administration, payroll, IT or HR. Outsourcing these functions allows the business to focus its management resources on driving the business forward.

Outsourcing isn’t for Everyone

Some might argue that outsourcing creates loss of control, less flexibility, questionable savings and the risk of over dependence on external vendors.

• Signing up to and implementing an outsourcing arrangement takes considerable management time. 
• Finding and selecting the right outsourcing company can even take months. 
• Outsourcing companies need to be given overall direction and guidelines in terms of what needs to be done, and therefore, some level of supervision by management will ultimately be needed. 

It is important to be careful when deciding what business functions to outsource and to whom. The management team needs to be clear in terms of its expectations and the cost savings must be attractive and worthwhile for the business.

Pension Allowance and Tax Saving!

Year end pension planning

Take advantage of the pension carry forward rules in order to benefit from any unused allowances from the previous three tax years.  This is generally the difference between the old £50,000 annual pension allowance and your pension input that year and can be added to your relief for 2015/16.

Note that the annual pension allowance is £40,000 for 2015/16 and 2016/17, although those individuals with income over £150,000 will have their annual pension allowance reduced by £1 for every £2 over £150,000.

To avoid losing pension relief brought forward from 2012/13 which lapses 5 April 2016, consider making an additional pension payment before 5 April 2016.  If your pension input was £24,000 in 2012/13 then there is £26,000 unused relief available to add to your 2015/16 allowance. You would need to make gross pension contributions of at least £66,000 (£40,000 plus £26,000) to avoid losing this generous relief.

Will pension tax relief change again on budget day?

There has been a lot of speculation that the Chancellor may announce further major changes to tax relief on pension contributions in his March Budget, based on consultations with the pensions industry.

Under the current rules an individual’s contributions can save them tax at their highest marginal rate and also help them avoid losing their personal allowance (see above). So a £8,000 pension contribution by a higher rate taxpayer results in £2,000 (20%) being added to their fund by HMRC = £10,000 gross. The £10,000 gross contribution would then save a further £2,000 in tax, so the net cost would be just £6,000 if they are a higher rate tax payer.

It is understood that the Government is considering introducing a flat rate of pension tax relief of between 25% and 33%, which would be good news for basic rate taxpayers, but higher rate taxpayers would lose out. If say a 30% rate of relief was to be introduced, a £7,000 contribution would be topped up to £10,000 with no further relief. It has also been suggested that it may not be possible in future to agree with your employer to sacrifice part of your salary in exchange for an additional tax free employer pension contribution.

The starting date of these possible changes is uncertain but they may be effective from Budget Day!

How to build an Ethical Business?

The new generation of professionals is concerned about corporate social responsibility (CSR) and wants to work for ethical businesses. 

The ethics of any firm are determined by its actions. If bending the rules results in rewards for some people as a result of increased short term revenue, or other perceived benefit, then many in the business will rightly believe that ethics don't matter, performance does. In other words, the end justifies the means. There will almost always be a tension between doing the right thing versus prioritising short term gains.  

Here are some tips to help you to build a more ethical business.

1. Be someone who you would want to discuss business with

If someone has a history of unethical behaviour, you will probably decline the opportunity of doing business with them. Sacrificing ethics usually means that someone (a supplier, for example) is getting a rough deal. Do you want your firm to be associated with this type of behaviour? Is it worth the potential reputational damage?

2. Accountability

Everyone in the business should be accountable for their actions. Management should lead by example and should own their mistakes as well as their successes, earning the respect of staff. Unethical behaviour should not be tolerated.

3. Values

Business leaders must take time to understand their own personal values and those of the team, what the value statements of the firm should be and identify gaps that exist between aspirational goals and current behaviour. To ensure buy-in and commitment from the whole firm, try to include members from various levels across the business to help create a "Code of Conduct" that is aligned with the firm’s ethical vision.

4. Establish Trust

Build an environment of trust with employees in order to create a business culture where employees feel free to discuss ethical dilemmas and issues with management.

5. Communicate 

The management team should ensure that the vision and code of conduct are communicated to everyone within the business. This can be done through policy manuals, training, internal newsletters, team meetings, etc. Efforts must be made to gather feedback from across the business in order to identify employee concerns regarding the ethical environment within the firm. This should be a continuous improvement process to identify concerns and improve the overall ethical direction of the firm.

APJ Accountancy

☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com 

Personal Savings Allowance Updated!

From 6 April 2016 the amount of any Personal Savings Allowance you’re entitled to will be based on your adjusted net income.

For every £2 that your adjusted net income exceeds £100,000, the £10,600 personal allowance is reduced by £1. Pension contributions and Gift Aid can help to reduce adjusted net income and save tax at an effective rate of 60%.

From April 2016 HM Revenue & Customs (HMRC) is introducing a tax-free Personal Savings Allowance of £1,000 (£500 for higher rate taxpayers) for savings income or interest.

The new allowance means that most people will no longer pay tax on their savings interest.

More information at Adjusted net income Guidance