Do I pass Class 2 NI if I’m employed and self employed?

NI when employed and self employedI have a full-time job but I also have a small business of my own. Therefore, I pay Class 2 NI contributions. But as I am paying my ‘stamp’ on my employment income, do I have to continue paying Class 2 as well?

Holly, Melksham

Class 2 contributions count towards:

• Incapacity Benefit/Employment and Support Allowance
• Basic State Pension
• Bereavement benefits
• Maternity Allowance

I’m afraid you do have to pay Class 2 NI; despite the fact you are paying Class 1 on your employment income. However, if your profits are deemed to be ‘small’ (currently £5,315), you may be eligible for an exception from paying Class 2 NI.

If you are only liable for Class 2 contributions, you should consider your position carefully before applying for an exception.

If you would like to discuss your personal tax affairs in more detail, please feel free to contact your local TaxAssist Accountant.

We provide tax and accountancy services in Bath and throughout the UK - http://www.taxassist.co.uk

What is a K code?

What is a K code?I have just received my tax code from HMRC for 2012/13, and it is a K code. Can you tell me what this means and how it will affect my income?

David, Sunderland

Your tax code shows how much tax-free pay (personal allowance) you are entitled to.

Your personal allowance can be increase by things like the Married Couple’s Allowance and professional allowances/ subscriptions.

But it can also be reduced by taxable income that you receive without any tax taken off it (some state benefits/ pensions etc), taxable company benefits and any unpaid tax you owe from previous years.

If you have been issued with a K code, such adjustments have reduced your tax-free allowance to such an extent, that they are actually more than your personal allowance. Normally, the number in a tax code indicates the amount of income you are entitled to tax-free. However, the number in a K code denotes how much should be added to your gross income, before calculating the tax to be deducted from your pay.

If you would like to discuss your personal tax affairs in more detail, please feel free to contact your local TaxAssist Accountant.

We provide tax and accountancy services in Sunderland and throughout the UK - http://www.taxassist.co.uk

Appealing a PAYE penalty

Appealing a PAYE penaltyI have just been issued with a penalty for late payment of PAYE and I think I have grounds for appeal. But how do I go about appealing the penalty?

Leah, Holborn

When HM Revenue & Customs (HMRC) notified you of the penalties, the letter should tell you if you have the right to appeal, together with how they arrived at their decision.

If the letter states you can and you want to proceed with an appeal, you must send your appeal to HMRC in writing within 30 days of the date of the decision. HMRC will need the following information from you:

• your business name
• your reference number (as shown on the decision letter)
• the decision/ assessment you are appealing against
• an explanation of what you disagree with and why
• what you think are the correct figures and how you've calculated them (where relevant)

If you would like professional assistance with your appeal, please feel free to contact your local TaxAssist Accountant who would be happy to help.

We provide tax accountancy services in Holborn and throughout the UK. http://www.taxassist.co.uk

PAYE Payment Dates

PAYE payment datesI have a few employees and I have paid the PAYE and National Insurance liability late in the past. Can you tell me what the exact payment deadline is to avoid me incurring fines in the future?

Rachel, Stevenage

If you are paying by cheque, the cheque must reach HM Revenue & Customs (HMRC) by 19^thof the month following the end of the tax month or quarter to which it relates. HMRC recommend that you allow at least three working days for the cheque to reach them.

If you are paying electronically, the due date is the 22^ndof the month following the end of the tax month or quarter to which it relates.

If the deadline should fall on a weekend or bank holiday, then the due date is the last working day before the normal deadline, i.e. the due date will be earlier than normal.

To remind you, put the dates in your diary, calendar or email account.

We provide tax accountancy services in Stevenage and throughout the UK. http://www.taxassist.co.uk

Christmas Gifts

Christmas giftsI’m looking at what to order for my employees for their Christmas presents. Is there any advice you have for me? I Want to make sure the business gets tax relief and can recover any VAT it incurs, but more importantly, I don’t want my employees to pay tax or National Insurance on their gifts.

Kai, Melksham

If you buy your employees a seasonal gift such as a joint of meat, a bottle of wine or a box of chocolates, then this would be deemed ‘trivial’ and therefore, there are no reporting requirements and nor would any tax or National Insurance be triggered.

However, if your gifts are more lavish than the examples above- say a hamper or a case of wine- then the cash equivalent must be taxed via the payroll, form P11D or a Pay As You Earn Settlement Agreement (PSA). With the first two options, tax and National Insurance will be triggered and will be deducted from the employee. However, with a PSA the employer agrees to settle their liability.

Gifts and entertaining is a fairly complex area, as it can have tax, National Insurance and VAT implications. Please feel free to contact your local TaxAssist Accountant if you would like to discuss this further.

We provide tax accountancy services in Melksham and throughout the UK. http://www.taxassist.co.uk