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Securing Your Legacy: A Succession Planning Guide for Sittingbourne Business

Fri, 21 Mar 2025 10:22:39 GMT

Securing your Legacy

"Hi Sittingbourne! Hannah here, from Pinnock Accounting Ltd. As a fellow local, I know how much heart and soul goes into building your business. It's more than just a job; it's your passion, your livelihood, and often, your legacy. That's why planning for its future is so crucial. Let’s face it, we all want to know our hard work will continue, even when we’re ready to step back.

This guide is designed to help you, the backbone of Sittingbourne's business community – our sole traders, our one-band wonders, and our small teams – navigate the often daunting world of succession planning. Let's make sure your business thrives, not just today, but for generations to come."

Why Succession Planning Matters – Especially Here in Sittingbourne:

"Imagine pouring years into your business, only to see it falter because there wasn't a plan in place. It's a risk none of us can afford, especially in our close-knit community. The Federation of Small Businesses (FSB) reports that 40% of UK businesses lack a succession plan. That’s a huge number, and I’m here to help make sure you aren’t one of them."

Local Impact: "Think about the impact on our local economy. Your business supports families, creates jobs, and contributes to Sittingbourne's unique character. A solid succession plan protects that."
Pinnock Accounting Ltd.'s Perspective: "At Pinnock Accounting Ltd., we see the consequences of neglecting succession planning firsthand. We've helped businesses with their weekly, monthly, quarterly, yearly accounting tasks..

The Benefits of Planning – For Your Peace of Mind:

"A well-crafted succession plan isn't just about the business; it's about your peace of mind. It's about knowing you've secured your legacy and provided for your loved ones."

Protecting Business Value: "Ensuring your hard work translates into lasting value."
Minimising Tax Burdens: "Navigating tax implications, like Capital Gains Tax (CGT) – which, as you know, is changing in 2025 and 2026 – and Inheritance Tax (IHT), is crucial.
Continuity for Your Community: "Keeping your business running smoothly for your loyal customers and dedicated employees."

Exploring Your Options – Tailored to Your Sittingbourne Business:

"Every business is unique, and so is every succession plan.

Family Succession: "If you're considering passing the business to a family member, let's have an honest conversation about their readiness and how to avoid potential family conflicts.
Selling to a Third Party

Key Steps – Your Roadmap to Success:

"Let's break down the process into manageable steps."

Define Your Goals: "What do you want your legacy to be?
Assess Your Business Value
Identify Potential Successors: "Whether it's a family member, a key employee, or an external buyer.
Develop a Detailed Transition Plan
Navigate Legal and Tax Considerations: "With the upcoming changes to CGT, it's more important than ever to get your tax planning right.
Communicate Effectively: "Open communication with your team, family, and stakeholders is essential for a smooth transition."
Regularly Review and Update: "Your business is dynamic, and your succession plan should be too. We'll help you keep it up-to-date."

 The Cost of Delaying – Don't Wait Until It's Too Late:

"Procrastination can lead to costly mistakes and unnecessary stress. Let's start planning today."

Call to Action:

"Don't leave your business's future to chance. Contact me, Hannah, at Pinnock Accounting Ltd. today for a free, no-obligation consultation. Let's discuss your succession planning needs and create a plan that secures your legacy.

Let's work together to ensure your Sittingbourne business thrives for years to come."

Pinnock Accounting Ltd.'s Promise:

"As your local accounting partner, Pinnock Accounting Ltd. is committed to providing you with personalised, expert guidance every step of the way. We understand the unique challenges and opportunities facing Sittingbourne's micro businesses, and we're here to help you succeed."

10 Popular tax-free benefits

Mon, 06 Jan 2025 20:41:20 GMT

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The income tax legislation contains a number of exemptions for benefits-in-kind. By making use of exemptions, it is possible to boost an employee’s remuneration package tax-free.

This article highlights ten popular benefits-in-kind which can be made available to employees free of tax and National Insurance contributions (NICs), and without any employer NICs charge either.

Mobile phones

Mobile phones are ubiquitous. A tax exemption enables an employer to provide an employee with a mobile phone, which can be used privately without an associated tax charge arising.

The exemption only applies where a mobile phone is made available for the employee’s use without ownership being transferred to the employee. Further, the exemption is limited to one mobile phone per employee. If the employee has more than one mobile phone which they can use privately, the second and any subsequent phones will be a taxable benefit.

However, no tax charge arises on a phone provided exclusively for business purposes. Where this is the case, non-business use should be prohibited and there should be no actual private use.

Trivial benefits

The trivial benefits exemption is a very useful exemption with potentially wide application. It enables an employer to provide low-value benefits to employees without triggering a tax charge.

Unless the employee is a director or other office holder of a close company or a member of their family or household, there is no limit to the number of trivial benefits that an employee can enjoy each tax year. For close company directors and members of their family or household, a cap of £300 per year applies.

As with most exemptions, availability of the trivial benefits exemption is contingent on the associated conditions being met. These are as follows:

The benefit is not cash or a cash voucher.

The cost of the benefit does not exceed £50. This will usually be the cost of providing the benefit. However, where the benefit is provided to more than one person, and the nature of the benefit or the scale of its provision means that it is impracticable to calculate the cost of providing it to each individual recipient, the benefit cost is the average cost per person of providing the benefit.

The benefit is not provided under a salary sacrifice arrangement.

The benefit is not provided in recognition of particular services performed by the employee in the course of the employment or in anticipation of such services.

The benefit can be used, for example, to provide tax-free Christmas and birthday gifts to employees.

Workplace parking

Parking can be expensive, and meeting the cost of employees’ parking can be a valued benefit. A tax exemption allows an employer to provide employees with workplace parking tax-free.

Workplace parking is the provision of a parking space for a car, van, motorcycle or a parking space or facilities for parking a cycle other than a motorcycle at or near the employee’s workplace. The exemption extends to the reimbursement of an employee’s parking costs, meaning that an employee can claim back the cost of parking in a commercial car park. The employer does not have to provide on-site parking for the exemption to apply – the parking can be in a nearby car park.

Late-night taxis home

A tax liability will normally arise if an employer meets the cost of an employee’s journey home from work. However, if the late working conditions are met, the employer can meet the costs of a taxi home where an employee works late.

The conditions are that:

the journey is made on an occasion when the employee is required to work later than usual and at least until 9pm;

these occasions are irregular;

by the time that the employee ceases work, public transport is not available, or it would be unreasonable to expect the employee to use it; and

the transport is provided by taxi or similar private road transport.

An employee can only benefit from this exemption for a maximum of 60 times each tax year.

Workplace meals

It is also possible to provide meals to employees without triggering a tax charge. A dedicated tax exemption enables the employer to provide meals to employees in a staff canteen or otherwise on the business premises. The employer can meet the cost without any associated tax liability provided that the following conditions are met:

The meals are provided on a reasonable scale.

All employees or all employees at a particular location are able to obtain a free or subsidised meal or a free or subsidised meal voucher or token.

If the employer runs a restaurant, café, hotel or similar, if the meals are provided in a restaurant or dining room at the same time as meals are being served to the general public, part of the room has been set aside for the staff and they eat their meal in that part.

The meals are not provided under a salary sacrifice arrangement or flexible remuneration arrangements.

The exemption also applies to light refreshments, such as tea and coffee.

Medical check-ups and health screenings

The tax legislation contains valuable exemptions for health screening and medical check-ups. The exemption is limited to one health screening assessment and one medical check-up each tax year.

For the purposes of the exemption, a health screening assessment is one designed to identify employees who may be at particular risk of ill health, and a medical check-up is a physical examination of the employee by a health professional for (and only for) the purpose of determining the employee’s health.

Annual parties and functions

The tax exemption for annual parties and functions is one with which most employers are familiar. It is often used to ensure that a tax liability does not arise in relation to the annual staff Christmas party; however, its application is not limited to Christmas events

The exemption only applies to annual events, such as an annual Christmas party or a similar annual function – it does not apply to one-off events. This can catch out the unwary. Further, it only applies where the cost per head of the event does not exceed £150. If more than one event each year, events will be tax-free as long as they fall within the limit. The £150 per head figure is a limit, not an allowance, and where exceeded, the full cost is taxable, not just the excess over £150.

Homeworking payments

Many employees are required to work from home some or all the time. Where this is the case, employers can make a tax-free payment to cover the additional costs of working from home.

The employer can either reimburse the actual additional costs of working from home (although this is likely to be time-consuming and difficult to calculate), or can pay a fixed amount of £6 per week (£26 per month) without the need for supporting evidence of the costs incurred. The amount is the same regardless of the number of days that the employee works from home.

Long-service awards

Employers are able to reward loyalty by providing employees who have at least 20 years’ service with a tax-free long-service award. The value of the tax-free award is capped and there are some conditions that need to be met to ensure that the award remains tax-free.

To qualify for the exemption, the award must be in a permitted form (which excludes cash, cash vouchers and credit tokens), and awards must not exceed the permitted maximum. This is £50 for each year of service.

Once an employee has benefitted from a tax-free long-service award, they are not able to benefit from another tax-free award for a further ten years – the exemption does not apply to a subsequent award if an award has previously been made to the employee to mark service with the same employer within the last ten years.

Recreational benefits

A limited exemption allows employers to provide employees with sporting or recreational facilities or the right to use such facilities without a tax charge arising on the benefit. The exemption only applies if the facilities are made available to employees generally.

The facilities must not be available to members of the public and must be used wholly or mainly by people whose right to use them arises from their employment. This means that whilst a workplace gym will fall within the scope of the exemption, paying an employee’s subscription to a private gym open to members of the public will not.

Going Up: Employers NIC from April 2025

Mon, 06 Jan 2025 20:33:46 GMT

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Employers fared badly in Autumn Budget 2024 as the Chancellor looked to them to provide £25bn of the additional £40bn that she needed to raise. The revenue target will be achieved by raising the rate of employers’ National Insurance contributions (NICs) and reducing the secondary threshold so that employers will be required to make contributions at a higher rate on more of their employees’ earnings.

However, the axe will not fall evenly, as the employment allowance is also increased from £5,000 to £10,500, which will mean some of the smallest employers will not pay any more in employers’ contributions than they do currently, and may even pay less. However, despite increased access to the employment allowance, the cost to larger employers will be significant. The changes take effect from 6 April 2025.

Employers providing taxable benefits-in-kind or using a PAYE settlement agreement will face further increases. The rate of Class 1A and Class 1B NICs are aligned with the secondary Class 1 NICs rate and these, too, are increased to 15% from 6 April 2025.

There are no changes to the contributions paid by employees which will remain at their current level for 2025/26.

Nature of employer contributions

Employers pay secondary Class 1 NICs on their employees’ earnings.

The liability arises on all earnings over the relevant secondary threshold. Unlike primary contributions, there is a single secondary rate, and contributions are payable at this rate on all earnings above the threshold.

The secondary threshold is set at £9,100 a year (£175 per week, £758 per month). From 6 April 2025, it will fall to £5,000 (£96 per week, £416 per month).

To encourage employers to take on certain categories of workers, higher secondary thresholds apply to workers under the age of 21, apprentices under the age of 25, armed forces veterans in the first year of their first civilian employment since leaving the armed forces and new employees working in special tax sites. Where an upper secondary threshold applies, the employer only pays secondary contributions if earnings exceed that threshold, and only on earnings in excess of that threshold.

The upper secondary threshold for under 21s, the apprentice upper secondary threshold and the veterans upper secondary threshold are set at £50,270 (£967 per week; £4,189 per month) for 2024/25. They remain at this level for 2025/26. The special tax site upper secondary threshold, which applies in respect of the earnings of a new employee for the first 36 months of their employment in a freeport or investment zone is set at £25,000 (£481 per week, £2,083 per month) for 2024/25. It, too, remains at this level for 2025/26.

Employment allowance

Eligible employers are able to claim an employment allowance, which they offset against their secondary Class 1 NICs liability until it is used up. This reduces the amount that they need to pay over to HMRC. If an employer’s liability for the year is less than the employment allowance, they do not pay any employers’ NICs. However, the allowance is capped at their liability for the year.

For 2024/25, the allowance is set at £5,000. It is increased to £10,500 for 2025/26.

Not all employers benefit from the employment allowance. For 2024/25, it is only available to employers whose Class 1 NICs liability in 2023/24 was £100,000 or less. This restriction is lifted from 6 April 2026, meaning larger employers will be able to benefit from the allowance, mitigating some of the impact of the rise in employer contributions.

However, the employment allowance is not available to personal companies where the sole employee is also a director, and this remains the same for 2025/26. However, family companies with at least two employees are able to claim the allowance.

Case study 1: Employment allowance to the rescue

A Ltd is a small employer with three employees. One employee is paid £10,000 a year, one is paid £20,000 a year and the third is paid £50,000 a year.

The employers’ NICs liability will rise by £2,477.40 in 2025/26. However, as their total liability at £9,750 (£750 + £2,250 + £6,750) is less than the employment allowance of £10,500, they will pay no employers’ NICs in 2025/26.

In 2024/25, their liability of £7,272.60 was more than the employment allowance of £5,000, meaning they must pay £2,272.60 to HMRC. Despite the increase in the rate and the reduction in the secondary threshold, A Ltd’s employer NICs bill will fall.

Case study 2: Overall reduction in employers’ NIC liability

B Ltd has six employees, all paid £30,000 a year. In 2024/25, they must pay £12,305.20 over to HMRC after deducting the employment allowance. Their total liability is £17,305.20 and the employment allowance is £5,000.

In 2025/26, their total liability is £22,500 and the employment allowance is £10,500, meaning they will pay £12,000 over to HMRC. The increase in the employment allowance offsets the increase to the secondary rate and the reduction is the threshold, so that they are slightly better off in 2025/26 than in 2024/25.

Case study 3: Overall increase in employers’ NICs

C Ltd has 120 employees, of which 100 are paid £20,000 a year and 20 are paid £40,000 a year. In 2024/25, their employers’ Class 1 NICs liability was £235,704. They were not entitled to the employment allowance.

In 2025/26, their employers’ Class 1 NICs liability increases to £330,000. However, they will be entitled to the employment allowance of £10,500, reducing what they pay to HMRC to £319,500. This is £83,796 more than for 2024/25.

Case study 4: Personal service company

David provides his services through his personal company, D Ltd. The company pays a salary of £12,570 (equal to David’s personal allowance) and he extracts further profits in dividends.

The changes to employers’ NICs will mean that the secondary Class 1 NICs liability on David’s salary will increase from £478.86 in 2024/25 to £1,135.50 for 2025/26. D Ltd is not entitled to the employment allowance as David is the sole employee and is also a director.

However, despite the increase, it is still worthwhile paying a salary at this level. The salary and employers’ NICs are deductible in computing the profits liable to corporation tax and will attract relief of at least 19%. This is more than the 2025/26 secondary Class 1 NICs rate of 15%.

Mitigation

Employers who are adversely affected by the changes may wish to look at their employee mix and consider recruiting, say, employees under the age of 21 or armed forces veterans who have recently left the armed forces to take advantage of the upper secondary thresholds, as this will raise the starting point for contributions from £5,000 to £50,270 for 2025/26, allowing the employer to save up to £6,790.50 per employer.

Employers could also consider taking one or two part-time employees instead of one full-time employee to access an additional secondary threshold.

Benefits-in-kind

Employers must pay Class 1A NICs on most taxable benefits-in-kind provided to employees. As the Class 1 NICs rate increases to 15% from 6 April 2026, this makes the provision of taxable benefits more expensive, and exempt benefits more valuable. Employers wishing to provide non-cash benefits could pick exempt benefits rather than taxable benefits to save on the associated Class 1A NICs. The rise in Class 1B NICs to 15% will make it more expensive for an employer to meet a liability on behalf of the employees by including a benefit within a PAYE settlement agreement (PSA). Employers are advised to review existing PSAs to check whether they remain affordable.

Practical tip

Employers should assess how the increase in employers’ NICs will affect them, and whether their bill will increase, and consider whether they can take action to reduce it.

Spring Budget 2024

Sat, 04 May 2024 21:15:33 GMT

Spring Budget 2024: A Breakdown of Key Measures

The Chancellor's Spring Budget 2024, delivered on April 5th, focused on measures to support economic growth, ease the cost of living, and invest in public services. Here's a breakdown of some key announcements:

Tax Cuts for Workers and Businesses:

Reduced National Insurance: A significant win for employees is the reduction in National Insurance contributions. The main rate of Class 1 NICs has been cut from 10% to 8%, and the main rate of Class 4 NICs for the self-employed has seen a drop from 8% to 6%. This translates to more money in people's pockets.
VAT Threshold Increase: The VAT registration threshold has been raised to £90,000, offering relief for many small businesses by removing the need to register for VAT.

Helping with the Cost of Living:

Extension of Household Support Fund: To help ease the financial burden on vulnerable households, the government announced an additional £500 million for the Household Support Fund. This provides local councils with resources to offer essential cost assistance.
Fuel and Alcohol Duty Freeze: Faced with rising inflation, the Chancellor opted to freeze fuel and alcohol duties. This provides some immediate relief for consumers.

Investment in Public Services:

Increased NHS Funding: Recognizing the pressure on the National Health Service, the Budget allocated additional resources to the NHS to improve healthcare services.
Early Years Funding Boost: The government committed to increased funding for early years education, promoting access to quality childcare for families.

Other Key Measures:

Help for Working Parents: Measures were announced to support working parents, such as exploring options for more flexible work arrangements.
Boost for Green Initiatives: The Budget included initiatives promoting investment in renewable energy and energy efficiency, supporting the transition to a greener future.

Looking Ahead:

While the Spring Budget offered some positive steps, the long-term impact on the economy and cost of living remains to be seen. It's crucial to stay updated on further developments and their potential impact on your finances.

Additional Resources:

GOV.UK - Spring Budget 2024: https://www.gov.uk/government/topical-events/spring-budget-2024
House of Commons Library - Spring Budget 2024: A summary: https://commonslibrary.parliament.uk/research-briefings/cbp-9979/

This blog provides a starting point for understanding the Spring Budget. We encourage you to delve deeper into the specific measures that may affect you and your financial situation.

Heads Up High Earners, Threshold for PAYE is Bumped up to £150k for Tax Year 2024/25

Wed, 03 Jan 2024 12:48:09 GMT

Threshold for PAYE income is rising from £100,000 to £150,000 for the 2024/25 tax year.

Ditch the Form & Chill: High Earners Threshold Boost for PAYE income Earners in 2024/25!

High earners, rejoice! The dreaded self-assessment threshold is getting a significant bump for the 2024/25 tax year. Starting April 6th, 2024, if your sole income comes from PAYE wages, you'll be sailing past the filing requirement unless you earn above £150,000. That's £50,000 extra breathing room compared to the current £100,000 threshold!

But hold on before you break out the celebratory bubbly. This simplified filing option is only for those with straightforward PAYE income. If you're self-employed, run a sole trader business, or have complex tax affairs (think rental income, foreign earnings, etc.), you'll still need to submit a tax return like in previous years.

Confused? Need help navigating the new rule? Don't fret! We're here to guide you through this tax year upgrade.

Review your specific situation and determine if you need to file a self-assessment return.
Handle the entire filing process for you, ensuring accuracy and compliance.
Offer valuable advice and support to simplify your tax journey.

Remember, staying informed and compliant is key to avoiding unnecessary stress and penalties. Whether you're a PAYE earner basking in the threshold raise or navigating the complexities of diverse income sources, we're here to help you stay ahead in the game.

Get in touch. We offer accounting, bookkeeping tax returns, virtual accounting department services.

Remember to "Stay informed, stay compliant, and stay ahead in the game"!

#taxreturns #PAYE #goodnews #accounting #bookkeeping #taxservices

P.S. Share this blog with your high-earning friends and family – spread the good news about the threshold increase!