What is a PAYE Tax Code? A PAYE (Pay As You Earn) tax code is issued by HMRC and tells employers how much income tax to deduct from an employee’s salary. It’s your responsibility to check that you’re on the right tax code, not your employer’s. Most people will have a tax code like 1257L - this is the standard code for the 2025/26 tax year, which gives a £12,570 tax-free personal allowance. But not everyone will have this code. Reasons for a different code can include: Having more than one job or pension Receiving benefits in kind (e.g. company car, private medical insurance) Underpaid tax from previous years Marriage Allowance claims Student loan repayments or adjustments Other common codes include: BR – all of your salary or pension will be taxed at the basic rate of tax (currently 20%) – this is common if you change jobs during the year or if it’s a second job 0T – you won’t get any personal allowance with this tax code as HMRC expect your earnings to be over £125,140 D0 – all of your salary or pension will be taxed at the higher rate of tax (currently 40%) D1 – all of your salary or pension will be taxed at the additional rate of tax (currently 45%) Tax code letters The letters at the end of your tax code are for different situations: L – the numbers show how much tax free allowance you get K – the numbers show how much additional income you need to pay tax on – this can happen where you have high benefits in kind/low personal allowance S – Scottish tax rates apply C – Welsh tax rates apply W1/M1 or X – your salary or pension will be taxed on a single week/month basis (usually tax is calculated cumulatively for the tax year to date) Why It’s Important to Check PAYE Tax Codes Before April Payroll Tax codes are generally cumulative so issues can be fixed easily during the year, but checking and correcting any errors before your April salary is processed means you won’t have any shocks with your first pay of the year. If you’re not sure what your tax code, sign up to or log into your personal tax account ( https://www.gov.uk/personal-tax-account ). What Employers Should Do Although it’s ultimately an employee’s responsibility to check their own tax codes, and you won’t have any information about how the tax code has been calculated, it’s worth reviewing tax codes prior to running the first payroll. This means you’re less likely to have employees querying their pay, HMRC sending updates later and time-consuming adjustments/re-runs. Download the latest codes Check for any non-cumulative or BR codes Check that employees earning more than £125,140 are on a 0T or K tax code Encourage employees to check their codes It’s far easier to get it right from the start. Need Help with Payroll? We’re here to help. At CJL Accountancy, we offer friendly, expert payroll support as part of our accounting compliance packages so you can focus on running your business without the stress of tax surprises.

This year brings several significant tax adjustments, which could affect both individuals and businesses. Key Tax Changes Effective 6 April 2025 1. Employer National Insurance Contributions (NICs): - The rate for employer NICs has increased from 13.8% to 15%. - The threshold at which employers begin paying NICs has decreased from £9,100 to £5,000. This means businesses will incur higher employment costs, potentially influencing hiring decisions and wage structures, ultimately affecting employees. 2. Employment Allowance - This is an allowance against employers NI and has increased from £5,000 to £10,500. - It is also open to more employers as you can now claim if your employer NI in the previous year was over £100,000, however, you’re still unable to claim if the only person on the payroll is a director. 3. National Minimum Wage (NMW): - NMW increased from 1 April 2025 to £12.21 per hour for those aged 21 and over, £10.00 for those aged 18-20 and £7.55 for under 18’s or apprentices. 4. Stamp Duty Land Tax (SDLT): - The temporary reductions in SDLT stopped on 31 March 2025 so new purchases will be at the higher rates. 5. Business Asset Disposal Relief (BADR): - BADR is a reduction in capital gains tax for sales of business or company shares (where you’re an employee or director) – various criteria apply. - The rate has increased from 10% to 14%. 6. Non-Domiciled ('Non-Dom') Tax Status Abolition: - The government will abolish the non-dom tax regime, which previously allowed certain residents to avoid UK taxes on foreign income. This change may influence the residency decisions of high-net-worth individuals and could have broader economic implications. 7. Late Payment Interest Rates: - HMRC will increase interest rates on late tax payments to 8.5%, effective from 6 April 2025. This adjustment aims to encourage timely tax payments and ensure fairness among taxpayers. 8. ISA’s - Although nothing has been announced yet, HMRC are looking at potentially reducing the ISA allowances later in the year. Tax Rates and Thresholds The income tax rates and thresholds remain unchanged from previous years rather than increasing in line with inflation which means that people pay more tax as their incomes increase. This is known as fiscal drag. Implications for Taxpayers The combination of these tax changes and the effects of fiscal drag underscore the importance of proactive financial planning. Individuals and businesses should: Review Financial Plans: Assess how the new tax rates and thresholds impact your financial situation and adjust budgets accordingly. Seek Professional Advice: Consult with tax professionals to explore strategies that mitigate increased tax liabilities, such as tax-efficient investments or restructuring income. Stay Informed: Keep abreast of tax legislation changes to ensure compliance and optimize financial decisions. At CJL Accountancy, we are committed to guiding you through these changes and helping you navigate the complexities of the evolving tax landscape. For personalised advice and support, please contact us.

Building upon previous initiatives, the Chancellor introduced a series of robust measures aimed at closing the tax gap. Enhanced Investment in HMRC The government plans to invest further in HM Revenue & Customs (HMRC), focusing on advancing cutting-edge technology and expanding HMRC's capacity to tackle tax avoidance more effectively. The objective is to increase the number of tax fraud prosecutions by 20%, which is projected to raise an additional £1 billion annually by 2029-30. Consultation on New Anti-Avoidance Measures In a move to further tighten the noose on tax avoidance, the government has launched a consultation titled "Closing in on Promoters of Tax Avoidance." This initiative seeks public and professional input on proposed measures that would grant HMRC additional powers and impose stronger sanctions on those promoting tax avoidance schemes. The goal is to disrupt the business models of the few remaining promoters and contribute to reducing the tax gap associated with marketed tax avoidance. Implications for Taxpayers and Advisors These developments signal a clear message: the government is intensifying its efforts to ensure compliance and fairness within the tax system. Taxpayers and their advisors should be vigilant and proactive in understanding these changes to avoid inadvertent non-compliance. Engaging with professional advisors who are abreast of the evolving tax landscape is more crucial than ever. Conclusion If you’re looking for peace of mind then book a call with CJL Accountancy; we can help you stay compliant.

Understanding Children’s Tax Allowances In the UK, children are entitled to the same tax-free personal allowance as adults. For the 2024/25 tax year, this stands at £12,570. This means that if a child receives income below this threshold, they won’t pay income tax. Additionally, children can benefit from savings allowances, capital gains tax exemptions, and Junior ISAs to grow their wealth tax-free. Ways to Utilise Your Children’s Tax Allowances 1. Setting Up a Junior ISA (JISA) Parents and grandparents can contribute up to £9,000 per tax year into a Junior ISA for a child. The income and gains from these investments are tax-free, providing a great way to build up tax-efficient savings for their future. 2. Gifting Assets to Children Transferring income-generating assets such as shares or property to your child can allow income to be taxed at their lower rate. However, HMRC rules state that if parents gift assets to their children and the income exceeds £100 per year, it will be taxed as the parent’s income. This rule does not apply to gifts from grandparents. 3. Using Trusts for Tax Planning A discretionary or bare trust can help transfer assets to children while potentially reducing inheritance tax (IHT) liability. A bare trust allows income to be taxed at the child’s rate, while a discretionary trust gives trustees control over distributions. 4. Paying a Salary to Your Child If you own a business, employing your child in a legitimate role can be an effective way to utilise their personal tax allowance. The salary must be reasonable for the work performed and comply with minimum wage laws. Payments below the thresholds mean no income tax or National Insurance contributions are due. 5. Capital Gains Tax (CGT) Allowance Children also have an annual capital gains tax allowance (£3,000 for 2024/25). If you gift them assets that appreciate in value, they can sell them and use their CGT allowance, potentially saving tax compared to selling the assets yourself. Key Considerations and HMRC Rules 1. The £100 income rule applies to parental gifts, but not to gifts from other family members. 2. Gifts to children must be genuine and without strings attached. 3. For business payments, children must be employed in a genuine role with reasonable compensation. 4. Trusts can be complex and may have tax implications, so professional advice is recommended. Conclusion Utilising your children’s tax allowances can be a smart way to reduce your tax bill while securing their financial future. However, it’s crucial to comply with HMRC regulations to avoid unintended tax consequences. At CJL Accountancy, we can help you structure your finances efficiently and legally. Get in touch with us today for tailored tax planning advice!

Why Cash Flow Matters More Than Profit Many business owners focus heavily on profitability, which is, of course, essential. However, even a profitable business can fail if it doesn’t have enough cash on hand to cover its obligations. Cash flow is the lifeblood of a business—it ensures that you can pay suppliers, employees, rent, and other operational expenses. A lack of available cash can lead to missed payments, damaged supplier relationships, and even insolvency. Common Cash Flow Mistakes Overestimating Revenue – many startups and small businesses make optimistic projections about their sales and revenue. When these projections don’t materialise, they can be left scrambling to cover costs. Poor Expense Management – spending too much on unnecessary expenses, such as extravagant office spaces or excessive marketing before the business is stable, can quickly drain cash reserves. Late Payments from Customers – if a business doesn’t have a system in place to ensure timely payments from customers, it can experience serious cash flow shortages. Many small businesses struggle with late or unpaid invoices, which disrupt operations. No Cash Reserve – a business without a financial cushion is highly vulnerable to unexpected costs, such as equipment breakdowns, economic downturns, or changes in market demand. Rapid Growth Without Financial Planning – scaling up too quickly without proper financial backing can be just as dangerous as not growing at all. More customers mean more costs—if cash isn’t managed effectively, a growing business can run into serious trouble. How to Improve Cash Flow Management Monitor Cash Flow Regularly – keep an eye on cash inflows and outflows to identify potential problems before they become major issues. Invoice Efficiently – use digital invoicing systems and set clear payment terms to ensure that customers pay on time. Cut Unnecessary Costs – regularly review expenses and cut back on non-essential spending. Negotiate with Suppliers – if possible, negotiate better payment terms with suppliers to align outgoing payments with incoming revenue. Build a Cash Reserve – set aside funds to act as a buffer for unexpected expenses. Use Accounting Software – automated tools can provide real-time insights into cash flow and help with financial forecasting. Conclusion While many factors contribute to business failure, poor cash flow management is the most common and often the most preventable. By keeping a close eye on your cash flow, making informed financial decisions, and planning for the future, you can give your business the best chance of long-term success. At CJL Accountancy, we help businesses take control of their finances, improve cash flow, and stay on track for sustainable growth. If you need expert advice, get in touch with us today!

Rates and Thresholds for 2025/26 Most of the tax rates and thresholds for 2025/26 are the same as for 2024/25 with a couple of changes: National Insurance Lower Earnings Limit increased to £6,500 – if you have earnings above this then the year counts towards state benefits including state pension National Insurance Secondary Threshold reduced to £5,000 – this is the point where your limited company begins paying national insurance Employers National Insurance rate increased to 15% – your limited company will pay 15% of your salary above £5,000 in employers NI (the employers national insurance rate for benefits in kind is also increased to 15%) Employment Allowance increased to £10,500 – this allows eligible employers to reduce their employers NI liability by up to £10,500 Considerations: National Insurance Contributions - a salary above £6,500 ensures you receive a qualifying year for state pension purposes. Company Profitability - dividends can only be paid from distributable profits. Ensure your company has sufficient profits before declaring dividends. Employment Allowance Eligibility - generally, companies with more than one employee or those paying NI on employees' earnings may qualify. Single-director companies without additional employees do not qualify. Tax-Free Childcare – there are income requirements to qualify for this Pension Contributions – you can only make personal pension contributions up to your UK relevant earnings (up to the annual allowance) so if your salary is low, your tax-efficient pension contributions will also be low. However, employer pension contributions are only restricted to the annual allowance, not your UK relevant earnings. Recommended Salary and Dividend Strategy A common tax-efficient approach involves drawing a combination of salary and dividends. This method leverages the personal allowance and typically results in lower NI contributions. The level that’s most tax-efficient for you will be dependent on your personal and company circumstances. Contact us to discuss the best solution for you and your business.

Whether you're self-employed, an influencer, a small business owner, or running a limited company, a few strategic moves could reduce your tax bill and improve your financial health. Here are some essential tax planning tips to consider before the deadline. Maximise Your Allowances Each tax year, you’re entitled to various tax-free allowances, and if you don’t use them, you lose them. Some key allowances to consider: Personal Allowance – the first £12,570 of your income is tax-free. Ensure you’re making full use of it, especially if your income fluctuates. Dividend Allowance – if you receive dividend income, the first £500 is tax-free. Check out our previous blog about tax-efficient director salaries and dividends for more information. The Trading Allowance gives £1,000 of tax-free gross income per year from self-employment and the Property Allowance gives £1,000 of tax-free gross income per year from rentals. If you let a room in your home, up to £7,500 per year can be received tax-free. There is also a Capital Gains Tax (CGT) Allowance – you can make up to £3,000 in capital gains tax-free before the allowance resets. If you’re planning to sell assets, consider doing so before the new tax year. Make Pension Contributions Pension contributions benefit from tax relief whether made by you personally or by your employer/limited company. Check out our previous blog about pension contributions for more information. Boost Your State Pension You can pay voluntary National Insurance contributions to fill gaps in your record to boost your qualifying years that are used to calculate your State Pension entitlement. Claim Employment Expenses As an employee there are a few tax reliefs that can be claimed against your employment income if your employer hasn’t re-imbursed you: Professional subscriptions Working from home allowance – only where your employer requires you to work from home, not where you choose to Business miles travelled in your own vehicle Uniform allowance for specific jobs Claim All Allowable Business Expenses If you’re self-employed or running a business, ensure you’ve claimed all eligible expenses, including: Home office costs Business travel and subsistence Equipment and software Marketing and advertising expenses Check out our previous blogs about costs you can claim for more information, for influencers here , landlords here and others here . Invest in Business Equipment Before Year-End Purchasing business-related equipment (such as a new laptop, camera, or office furniture) before your business year end means you can deduct the cost from your taxable profits for the current year, speeding up your tax relief. Marriage Allowance If one party to the marriage/civil partnership is a basic rate taxpayer and the other has income below the personal allowance, it’s worth considering whether to apply for marriage allowance. This transfers 10% of the non-taxpayer’s personal allowance to their spouse which saves up to £252 in tax. Check Your Tax Code Many people overpay tax due to incorrect tax codes. If you’ve changed jobs, gone self-employed, or received benefits like a company car, it’s worth checking your tax code via HMRC’s website. Use Your ISA Allowance If your interest income is above your personal savings allowance or your dividend income is above the dividend allowance, then you’ll be subject to tax on some of your investment income. You can invest up to £20,000 in an Individual Savings Account (ISA) each tax year, shielding it from income tax and capital gains tax. If you haven’t maxed out your ISA, consider contributing before 5 April. The personal savings allowance is £1,000 for basic rate taxpayers, £500 for higher rate taxpayers and £0 for additional rate taxpayers. With interest rates increasing recently, some people will be caught out by this. Tax-Efficient Investments If you invest in Venture Capital Trusts (VCTs), Enterprise Investment Schemes (EIS) or Seed Enterprise Investment Schemes (SEIS) then there are tax reliefs available up to certain limits. However, it must be noted that these investments can be risky so speak to your financial advisor. Act Now to Save on Tax Taking proactive steps before the tax year end can make a significant difference to your tax bill. If you're unsure about the best strategies for your situation, consult a tax professional to ensure you’re making the most of available allowances and reliefs. Need help with your tax planning? Get in touch today to maximise your savings before the 5 April deadline!

How Pension Contributions Reduce Your Tax Bill Pension contributions benefit from generous tax relief; the key tax advantages include: Tax Relief on Personal Contributions – you receive 20% tax relief automatically; it gets added to your pension. For example, if you contribute £800, the government add £200 so there’s £1,000 in total. Additional Tax Relief on Personal Contributions – if you’re a higher or additional rate taxpayer, you can also receive more tax relief. There’s more information about how this works below. Corporation Tax Savings – employer pension contributions are tax-deductible business expenses, reducing corporation tax liabilities which means it’s a tax-efficient part of your salary package from your limited company. How Much Can You Contribute? The amount that can be contributed to your pension and still receive tax relief depends on your earnings and the annual allowance. Your earnings are salary and self-employed profits, not interest, dividends or rental profits. Everyone can contribute £2,880 to a pension contribution, even if they don’t have any earnings. Generally the maximum that can be contributed is 100% of your earnings up to a maximum of the annual allowance which is £60,000 for 2024/25. The annual allowance can be reduced to £10,000 per year if you have flexibly accessed your pension pot or if you’re a high earner. If you’ve used your annual allowance in the current tax year, you may be able to carry over annual allowances from the previous 3 tax years where they were not used in full. If you exceed the annual allowance, then you may need to pay a tax charge. Employer vs. Personal Contributions Personal Contributions When you make a contribution to your pension pot, the government add 25%. If you’re a higher or additional rate taxpayer you can also receive additional tax relief. This can either be received via your salary if your pension contribution is deducted from your gross pay, or, if it’s deducted from your net pay or you contribute outside of a salary, you can claim this separately. Claiming the additional tax relief works by increasing your basic rate tax band and can give up to another 25% of tax relief. If you file a tax return you can make the claim there. Otherwise, you can make a claim on the HMRC website https://www.gov.uk/guidance/claim-tax-relief-on-your-private-pension-payments . Employer Contributions As long as the whole remuneration package (salary, benefits and pension) is reasonable for the work, employer contributions count as an allowable business expense which will reduce the company tax liability. Maximising Pension Contributions Before Year-End With the tax year ending on 5 April, here are some strategies to make the most of your pension contributions: Top Up Contributions – if you have unused annual allowance, consider making additional contributions before the deadline. Check Carry Forward Entitlement – if you haven’t maximised contributions in previous years, you may be able to use the carry forward rule to contribute more. Ensure Employer Contributions are Made – if you’re a company director, ensure pension contributions are processed before year-end to claim tax relief. Review Pension Investment Strategy – ensure your pension investments align with your long-term financial goals. Conclusion Need help with pension planning? We can work with you and your financial advisor. Get in touch today to make the most of your tax-efficient savings!

Understanding the Salary and Dividend Strategy As a company director, you can choose how to pay yourself: via a salary, dividends, or a mix of both. Each method has different tax implications, so structuring your income efficiently can lead to significant savings. Salary – subject to Income Tax and National Insurance but allows you to qualify for state benefits and pension contributions. Dividends – paid from company profits after Corporation Tax, taxed at lower rates than salary but do not count towards National Insurance contributions or earnings for pension contributions. Setting a Tax-Efficient Director’s Salary There are various thresholds to consider when looking at the salary level: At the National Insurance (NI) Lower Earnings Limit (£6,396 for 2024/25) – no NI contributions due, but qualifies for state benefits (including state pension). Below the NI Secondary Threshold (£9,100 for 2024/25) – employers NI becomes payable if salary exceeds this amount. Below the NI Primary Threshold (£12,570 for 2024/25) – no personal tax or employees NI to pay, but employers NI would be payable. Below the tax Higher Rate Threshold (£50,270 for 2024/25 as long as total income doesn’t exceed £100,000) – basic rate tax only (20%) but employees and employers NI would be payable. For many directors, the optimal salary level is £12,570 (within the personal allowance), while ensuring employer NI contributions are considered. If you have children you may also wish to consider the tax-free childcare rules which are based on your income level. Taking Dividends Tax-Efficiently After taking a salary, dividends can be used to extract additional income from the business in a tax-efficient way. Key points to consider: Tax-Free Dividend Allowance – the first £500 of dividends (2024/25) is tax-free. Dividend Tax Rates - basic rate: 8.75% (for income up to £50,270), higher rate: 33.75% (for income between £50,270 - £125,140), additional rate: 39.35% (for income above £125,140) Ensure Sufficient Retained Profits – dividends must be paid from post-tax profits, so check company finances before issuing dividends. Year-End Planning Considerations With the tax year ending soon, consider these steps: Use Your Tax-Free Allowances – ensure you use the full personal allowance (£12,570) and dividend allowance (£500) where possible before they reset; they can’t be carried over. Balance Salary & Dividends – ensure you extract income in the most tax-efficient way, keeping personal and business taxes low. Consider Pension Contributions – employer pension contributions are a tax-efficient way to extract profits from the business. Next week’s blog will be about pension contributions so watch this space. Plan Ahead for 2025/26 We’ll be posting an updated blog next month looking at planning for the 2025/26 tax year. The employers NI threshold is changing from 6 April 2025. Take Action Before 5 April! Now is the time to review your strategy to ensure you maximise tax efficiency before the end of the tax year. If you need tailored advice on the best approach for your business, book a call with us today.