UK Tax News

Pay accountancy invoices by card

Published: 07 Nov 2012

Updated: 22 Nov 2012

Written by Ray Coman

Coman & Co are pleased to announce that we can now offer credit and debit card payments. We hope the new service will provide extra convenience and choice to our clients. Furthermore, to encourage our clients to take up the new facility, we will not be adding any charges for debit card payments.  (We would pass the 3.45% credit card charge onto you.)

The payment facility is powered by well recognised WorldPay . Payments can be made securely online, or via telephone saving our clients hassle. Your card details will be protected and safe.

Our card collection system offers two basic alternatives.

1. When we send our invoice, you would receive a weblink, which directs you straight to a pre filled payment form. Simply select your payment method and enter your card details. You will receive a confirmation from our partner WorldPay of the date and amount of transaction.
2. Provide us with your credit or debit card details and we will collect payment, according to your instructions. All card details held at our office are encrypted, and password protected by our payment software.

We would never proceed with payment collection without your express instructions, giving you full peace of mind.  We provide written estimates and invoice after completion of agreed work.  We would not take advance payments for work to be carried out.

We also continue to offer a PayPal alternative. If you prefer to pay using PayPal, please use our email [email protected] quoting your invoice number as a reference.

We accept payment from ViSA, Mastercard, JCB, Maestro and AMEX.

Please contact us if you have any queries on the above

PAYE payment overdue 2012-13

Published: 28 Oct 2012

Updated: 22 Nov 2012

Written by Ray Coman

A reminder to pay tax is not generally welcome on the doormat.  Less so when it is scarcely possible to make sense of, and is unexpected or well overdue, as is often the case.  So , to set the mind at rest, this guide briefly outlines the rules for PAYE payments, and in particular the options available to self-employed people who are directors of their own company.

PAYE payments

For employers, PAYE is due seventeen days after the end of the tax month.  The tax month ends on 5^th of each month.  Therefore payments are due by the 22^nd of the month, relating to pay for the month ending on the 5^th.  Where estimated payments of tax are less than £1,500 per month, an employer can arrange with HMRC to make quarterly payments of tax.

Reminder letter from HMRC, where no tax is due

Regardless of whether the business has a PAYE liability, HMRC havebeen routinely issuing reminder letters for payments of PAYE tax.  One response is to file a nil monthly PAYE Return.  However, this can be a time-consuming process, particularly where no PAYE payments are expected for several future months.  An alternative is to arrange with HMRC for an annual payment to be made.  At present the drawback here is that the transfer to an annual basis involves often less than straightforward arrangements with HMRC which have to be re-performed each year.  Furthermore, on account of the various and ever-changing HMRC offices which seem to administer PAYE, HMRC have not been effective in their response to arranging for an employer to be entered onto an annual payment basis.  In practice the outcome is typically that undue time and resources are spent by both employers and HMRC in responding to debt collection letters.

Reasons to register as an employer but make no payments of PAYE

Use of a company can save a self-employed individual considerable tax, where that person’s withdrawals from the company are treated as a salary no greater than the tax free personal allowance and as dividends thereafter.

The national insurance saved using a limited company rather than being a sole trader is at least 9% on any income between the Class 4 lower profits limit and upper profits limit.  Therefore, for 2012-13, profits between £7,605 and £42,475 per year made in a limited company will suffer 9% less tax than those made as a sole trader.  In money terms, up to £3,138.30 could be saved on a profit of £42,475 by operating the business through a company, rather than being a sole trader.

The savings are even higher when company income is compared with employment earnings.  In employment, national insurance is 12% for employees between the earnings’ threshold and upper earnings limit.  For 2012-13 the applicable limits are £7,592 and £42,484 respectively.  In addition, there is a further 13.8% saving for employers on earnings over the secondary threshold (of £7,488 for 2012-13.)  Where a contractor is prepared to forego their employment rights, and they consider that they can justify their self-employed status, the limited company option could save a lot of tax.

However, a key drawback is that the taxpayer’s national insurance record will not be updated and therefore social security benefits will not accrue.  In particular, each year that a taxpayer makes national insurance contributions (NICs) adds a qualifying year towards the total number required to secure entitlement to the basic state pension.  State pension accrual is explained in further detail later.

A salary up to the lower earnings’ limit (of £5,564 per year for 2012-13) will not require the business to register as an employer.  A salary above the lower earnings’ limit and up to the earnings limit (of £7,488 per year), will require the business to register as an employer, but will still not give rise to a national insurance liability.  Therefore, it is possible to accrue social security benefits by paying a salary equal to say £7,488 per year, which is above the lower earnings limit but not over the earnings threshold.  The advantage to the taxpayer is that a year is counted towards social security benefit, even though no liability to settle NICs has arisen.

Drawbacks of registering as an employer

However, as previously explained there is growing evidence of the practical obstacles in arranging to be an employer who makes no payments of PAYE.  As a consequence, considerable time and resources can be used by HMRC and the business owner in bringing about the intended outcome.  As a further drawback, an employer is open to penalties for late submission of an employer’s annual return, for missing the submission deadline.  The deadline is 19 May following the 5 April year end.  The late filing penalty is typically £100 per month for a company with only one director.  The penalties can be appealed against and often reduced to nil where there is no PAYE due.  Nevertheless, the appeal process can be bothersome and time-consuming for both business owners and HMRC.

Voluntary national insurance for business owners

Business owners wishing to benefit from the national insurance saved by operating through a company, but still wanting to contribute towards their state pension may consider voluntary NICs as a slightly dearer but less bureaucratic alternative.

Voluntary, or Class 3, NICs are a facility for individuals to contribute to their social security, and in particular their state pension, where the contribution would not otherwise be made.  No NICs would be made by a contractor using a company not registered as an employer.  Voluntary, or Class 3, NICs are currently £13.25 per week.  At the time of writing, the basic state pension is £107.45 weekly.  To receive the basic state pension, a taxpayer should have made 30 years of NICs.  The state pension age is currently 65 for men, and due to rise to 65 for women, with further plans afoot to increase the overall age to 67.  Evidently, the above is an overview only on the UK state pension, and you should seek further advice before taking any related action.

We are not authorised as financial advisers and therefore encourage you to draw your own conclusions from the above.  The above information is aimed at helping you to make a decision on whether to make voluntary contributions, where you are not adding to your state pension because you invoice from your company, and are not registered as an employer.

By most accounts, the basic state pension would not be sufficient to support a comfortable retirement, and therefore you should consider additional provisions, such as private pension contributions as part of a structured retirement arrangement.

To recap, a company is not required to submit an employers’ annual return until the director’s salary exceeds the lower earnings limit, which would still allow for most of the personal allowance to be used up.  As a result, there would be little or no gain in corporation tax by not registering as an employer.  To accrue social security, the route which is expected to be the least bureaucratic is reached by paying Class 3 NICs, and in the majority of cases the NIC payments would still be a lot less than that suffered by a sole trader.

Conclusion

In summary, for ‘one man band’ companies, not registering as an employer could prevent a lot of hassle dealing with HMRC reminders.  A state pension is likely to be only one component of a retirement plan, and the requirement can be fulfilled where necessary by delaying NICS or through a voluntary scheme.  In many cases, a voluntary scheme is a more ethical approach as well as making more commercial sense.  More broadly, a reduction in nil returns should prevent HMRC transferring PAYE administration to debt collection, often an outsourced service.  Please contact us for further advice relating to your intended plans as a business owner.

FAQs on self-assessment registration

Published: 21 Oct 2012

Updated: 24 Nov 2025

Written by Ray Coman

When to register, how to register and what to do if you are late are among the most common concerns when it comes to the self-assessment. In response to frequently asked questions, the following guide offers a brief overview on the topic of registration for self-assessment.

1. Do I need to complete a Self-Assessment Tax Return?

2. When must I notify HMRC?

3. What happens if I notify HMRC late?

4. What are the filing and payment deadlines?

5. What are the penalties if I file or pay late?

6. How long does it take to receive a UTR?

7. HMRC have never contacted me — how can I be late?

8. HMRC told me something different on the phone. What should I rely on?

9. What should I do if I have realised this late?

10. Assistance

1. Do I need to complete a Self-Assessment Tax Return?

The question is less about “being self-employed” and more about whether any part of your income falls outside what PAYE can sensibly deal with.

You would need to register for Self Assessment if any of the following apply:

Self-employment or trading activity

If you carry on a trade (even at a modest level) and your gross receipts exceed the £1,000 Trading Allowance, you fall into Self Assessment. Partners in a partnership register individually. This has not changed.

Property income

Any form of rental income (UK or overseas) needs to be reported. Joint ownership is assessed by reference to your share, not the property as a whole.

Untaxed or only partly taxed income

PAYE can deal with straightforward employment income, but does not collect tax on:

• dividends and investment income above allowances
• interest above the Savings Allowance
• foreign income, pensions or gains
• benefits-in-kind not fully captured by your tax code
• trust or estate income
• cryptoasset transactions
• casual or miscellaneous income

These all require a Tax Return.

Capital gains

A return is required if your gains exceed the annual exemption, or if the total proceeds exceed four times that exemption, even where the gains themselves are small. This commonly arises with share disposals and second properties. For more complex positions, refer also to the guidance on capital gains tax returns.

5. PAYE income above a threshold — the rule that no longer applies

For many years HMRC required a Tax Return if your employment income exceeded £100,000 (increased to £150,000 from 2023/24). This requirement was abolished from the 2024/25 tax year for those whose income is fully taxed through PAYE and who have no other sources of income. Untaxed or complex income will still give rise to a requirement. Many high earner will still need to do a Tax return because, for instance, they have bank interest.

Employment expenses

If your employment expenses exceed £2,500, HMRC generally requires a Tax Return to process the claim properly. The simpler “P87 route” applies only below that level.

Trust income

Trust or settlement income remains a standalone trigger. Even modest trust income requires a Self-Assessment return.

If none of the above applies, and you receive only employment or pension income fully taxed at source, you may not need a tax return.

When must I notify HMRC?

The deadline is 5 October following the end of the tax year in which the liability first arose. If, for example, your rental income began during 2024/25, you should notify HMRC by 5 October 2025. While this is the strict position, provided you have a UTR by the filing deadline (usually of 31 January following the end of the tax year), there is no negative repercussion to registering after 5 October. It is a common misconception that HMRC will write to the taxpayer first. In fact, the obligation works in the opposite direction: the taxpayer must tell HMRC.

What happens if I notify HMRC late?

Late notification is treated under the “failure to notify” regime. The penalty depends on:

• the amount of tax unpaid at the time you should have notified
• whether the behaviour was deliberate or simply oversight
• whether you disclosed the issue voluntarily
• the degree to which you co-operate in establishing the correct position

In practice, where the tax is paid in full by 31 January, penalties are often significantly reduced, and in many routine cases nothing further arises provided the return is then filed. Nevertheless, the legal position remains that HMRC may charge a penalty.

What are the filing and payment deadlines?

31 January: online tax return filing deadline

31 January: balancing payment for the year

31 July: second payment on account (if relevant)

31 October: paper return deadline

If HMRC issues a notice to file during the year, the deadline becomes three months from the date of the notice.

What are the penalties if I file or pay late?

The late-filing penalties are structured and do not depend on the amount of tax:

• 1 day late: £100
• 3 months late: £10 per day (up to £900)
• 6 months late: further 5% of tax due
• 12 months late: further penalties depending on behaviour

Late-payment penalties apply at 30 days, 6 months, and 12 months (each at 5% of the unpaid tax) and interest runs from the due date.

How long does it take to receive a UTR?

HMRC typically issues a Unique Taxpayer Reference within a few weeks, though the timeframe can lengthen in December and January. You cannot file online without it, so early registration avoids unnecessary compression near the deadline.

HMRC have never contacted me — how can I be late?

HMRC does not need to issue a notice before penalties can apply. The obligation to notify rests with the taxpayer. Many enquiries begin when HMRC receives third-party information (for example, employer records, interest statements, or property data) that indicates a return was required.

HMRC told me something different on the phone. What should I rely on?

Telephone guidance can be helpful for simple points, but it is not determinative. HMRC staff do not give tailored tax advice, and informal guidance cannot override legislation. Written guidance or a properly analysed tax position is more reliable, particularly if penalties or disclosure issues are involved.

What should I do if I have realised this late?

Register without delay, file the return as soon as the UTR arrives, and pay any tax due. Most late-notification cases resolve cleanly once the position is disclosed, especially if the tax is paid promptly and the behaviour is non-deliberate.

Assistance

If you need to register, prepare a Return, deal with past years or clarify the position, we can handle this and outline the tax exposure, deadlines and procedural steps.

Contact us if you would like to proceed.

Tax results of ‘shares for rights’

Published: 09 Oct 2012

Updated: 26 Nov 2012

Written by Ray Coman

At the Tory party conference yesterday, George Osborne announced that employees would be able to forego their employment rights in exchange for shares in their company.  Under the plans, company owners would be able to grant their employees shares with a value of between £2,000 and £50,000, which would be exempt from capital gains tax when sold.

Where a worker changes status from being employee, the national insurance savings for both employee and employer can be significant.  Under the rates applied for the year to 5 April 2013, national insurance for employees on earnings between £7,592 and £42,484 is 12%, and 13.8% for employers on earnings over £7,488. 

To put an example to the tax savings, by becoming a shareholder an employee earning £45,000 would save £4,237.36 per year, and would save the employer £5,176.66 in national insurance.  The net tax savings for employers would be £4,141.33, where the typical rate of corporation tax for most companies with a profit less than £300,000 is 20%.  As a practical consideration, the individual would save income tax, in more or less equal proportion to the extra corporation tax for the employer.  To prevent being out of pocket to the employee, gross pay should be reduced to reflect the increase in take home amounts.  The result still being a win for both sides on national insurance saved.

In principal, it has previously been possible for an employee to become a company shareholder, and achieve the tax savings outlined above.  Under the announced plans, however, the capital gains tax exemption however could result in significant further savings for workers giving up their employment rights.  Hence the, “workers of the world unite” avowal made from the chancellor.  The famous slogan, borrowed from Karl Marx, was seemingly a retort to Labour for claiming to be ‘One Nation’ in their conference, an idea borrowed from the conservative Benjamin Disraeli.

While the national insurance savings are immediately in evidence, the potential for capital gains tax savings is far less so.  Put into practice, an employee is not likely to regard the shares as an incentive where there is no apparent market for them.  On the other hand, any obligation on the employers’ part to buy the shares back would introduce a potential £50,000 deterrent to bringing in the initiative.

These shortcomings raise a question mark over whether the plans would emerge from the consultation in their announced form, or whether they would be widely adopted in practice.  Nonetheless, it is easy to interpret the proposal as signalling the government’s willingness to assist the small business sector with the burden of tax, employment law and related costs.

The essence of the planned scheme has the potential to be beneficial for all business, but particularly in the private owned sector, where business owners could have more influence over both management and ownership.  The proposal idea could result in a much needed confidence boost to the sector where it is hard to imagine how hiring costs could not be impeding growth.

In view of the obvious shortcomings, it is not easy to predict the precise workings of any resulting laws.  However the tax profession is typically prompt in its response to any significant change to the rules.  For more information on tax implications of your employment plans please contact us for an initial meeting.

Ray Coman becomes an FCCA

Published: 14 Jun 2012

Updated: 22 Nov 2012

Written by Ray Coman

The company director, Raphael Coman has been awarded the prestigious title of Fellow. This is demonstrates an extensive experience in the field of accountancy and proficiency within the profession.