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August - 3 - 2011

Quick reference guide to rates, thresholds and fees

Introduction

Rates, thresholds and fees, as well as rules and regulations, can alter annually with changes being announced in the Budget and usually implemented from the beginning of a tax year.
Over a year, a business owner has to make certain reports (returns) and payments to various government bodies. Some of these reports are made at the end of the tax year, some are made at the end of what is called an ‘accounting period’ while others are made quarterly or monthly.
Regardless of when a return or payment is made, you will need to ensure that you use the correct rate or allowance for the relevant tax year, or you may face a penalty.

Quick reference guide to rates, thresholds and fees

Other business-related facts and figures

Data protection

If your business processes personal information, you must comply with the Data Protection Act 1998. You must register as a ‘data controller’ with the Information Commissioner’s Office (ICO). The registration fee is £35 per year. Data controllers can charge up to £10 to provide information to someone who has asked to see it.

Late payment charges

Credit management procedures are key to your business’ financial health and even its survival once you are operational. If you receive late payments from customers, you are allowed to claim reasonable debt-recovery costs.
Currently late payment charges are:

  • £40 for debts up to £999.99
  • £70 for debts from £1,000-£9,999.99
  • £100 for debts of £10,000 and above

You are also entitled to claim interest on late payments under the Late Payment of Commercial Debts (Interest) Act. Interest is charged at 8 per cent over Bank of England base rate and is fixed for six-month periods.

Tax on business vehicles

The earnings threshold for treating company cars as a benefit in kind is £8,500 per year, including any taxable benefits and expenses payments.

Packaging recycling and recovery

The threshold for the requirement to register for recycling and recovery is turnover above £2 million and more than 50 tonnes of packaging handled annually.

Quick reference guide to rates, thresholds and fees

Income tax rates and allowances
Income tax is payable if you employ others or you are the director of your own limited company.
How much you deduct from wages or salary depends on the appropriate tax rate and tax band. Income tax is payable to HM Revenue & Customs (HMRC) through the PAYE (Pay As You Earn) system.

Tax rates and bands
Tax rate Tax bands in 2009-10
Basic rate: 20% £0-£37,400
Higher rate: 40% Over £37,400

The Chancellor announced in his April 2009 budget that there will be an additional higher rate of income tax of 50 per cent for taxable incomes over £150,000 per year from 2010-11.
The Chancellor also announced in his 2009 Pre-Budget Report that banks will be required to pay tax at a rate of 50 per cent on all bonuses paid to bank staff over £25,000 between 9 December 2009 and 5 April 2010.
A tax allowance is the amount of tax-free income an employee can earn in a year. All employees are currently entitled to a basic tax allowance. Some employees will be entitled to more than one allowance.

Income tax allowances
Type of allowance

Earnings for 2009-10 
and 2010-11

Personal allowance £6,475
Personal allowance (aged 65-74) £9,490
Personal allowance (aged 75 and over) £9,640
Income limited for age-related allowances £22,900
Married couple’s allowance for people born before 6 April 1935 £6,865
Married couple’s allowance – aged 75 or over £6,965
Minimum amount of married couple’s allowance £2,670
Blind person’s allowance £1,890

From 2010-11 the basic personal allowance for those earning over £100,000 will be gradually reduced to nil. The personal allowance will be reduced by £1 for each £2 over £100,000 until it has been completely withdrawn.

Quick reference guide to rates, thresholds and fees

National Insurance contributions
The majority of the working population is required to pay National Insurance contributions (NICs). These contributions go towards certain social security benefits, such as the state pension and jobseekers allowance.
The different types of NICs:

Primary Class 1 NICs – paid by employed people

An employee only starts paying NICs once they are earning above the earnings threshold (ET). If an employee earns less than the earnings threshold, they are treated as paying NICs on the earnings between the lower earnings limit (LEL) and the earnings threshold. Employees pay NICs at a lower percentage rate on earnings above the upper earnings limit (UEL).

Secondary Class 1 NICs – paid by employers

An employer pays secondary NICs on the same level of earnings as employees but there is no upper earnings limit.

NICs thresholds for employees and employers
NICs threshold Earnings per week 2009-10
Primary Class 1: ET £110
Secondary Class 1: ET £110
Primary Class 1: LEL £95
Primary Class 1: UEL £844

The Chancellor announced in his 2009 Pre-Budget Report that the LEL will increase to £97 per week in 2010-11.

NICs rates for employees and employers
Type Rate for 2009-10
Primary Class 1: employees earning over the ET 11% of £110.01 to £844 per week and 1% on all earnings above £844
Secondary Class 1: Employees earning over the ET 12.8% of earnings above £110 per week
Married women paying reduced rate NICs 4.85% of £110.01 to £844 per week and 1% on all earnings above £844
Employees’ contracted – out rebate 1.6%
Employers’ contracted – out rebate (salary-related schemes) 3.7%
Employers’ contracted – out rebate (money-purchase schemes) 1.4%

NIC rates for the self-employed

You will need to complete a self-assessment tax return on an annual basis. This will show the level of profits that you are declaring.

Class 2 NICs

If you are self-employed, you are probably liable for Class 2 NICs, which are payable at a flat weekly rate of £2.40 per week in 2009-10.
You do not have to pay Class 2 NICs if you earn less than £5,075 in 2009-10 and have a Small Earnings Exception certificate.

Class 4 NICs

Class 4 NICs you pay on annual profits above a certain level, at a rate of 8 per cent between the lower and upper profits limit and 1 per cent on profits above the upper profits limits.

  • Class 4 lower profits limit: £5,715 in 2009-10
  • Class 4 upper profits limit: £43,875 in 2009-10

The Chancellor announced in his 2009 Pre-Budget Report that NICs rates for 2010-11 for employees and employers will remain unchanged at the 2009-10 rates. However, he announced that Class 1, Class 4 and Class 1A and 1B NIC rates will increase in 2011-12.

Quick reference guide to rates, thresholds and fees

 

Employees’ pay and deductions
If your business has employees, you are responsible for deducting income tax and National Insurance contributions (NICs) from their earnings. You can do this using the PAYE (Pay As You Earn) system.
You will need to inform both your employees and HM Revenue & Customs (HMRC) of how much has been deducted every year.
You may also need to manage other payroll deductions, such as payment for student loans.

Legal obligations

A range of legal obligations also apply to staff pay. Depending on the age of your staff and other conditions, varying rates of the National Minimum Wage (NMW) will apply.

NMW rates for pay reference periods starting on or after 1 October 2009

  • £5.80 an hour for workers aged 22 or over
  • £4.83 an hour for workers aged 18 to 21
  • £3.57 an hour for workers aged 16 and 17 who are over compulsory school age

The government has also confirmed that for pay reference periods starting on or after 1 October 2010 the adult rate of NMW will apply to those aged 21 and over (currently payable to those aged 22 and over).
Certain groups of workers are not entitled to the NMW.
Under certain conditions, you may also have to pay an employee statutory sick pay (SSP), statutory maternity pay (SMP), statutory paternity pay (SPP) or statutory adoption pay (SAP).

Statutory pay rates
Statutory pay type Pay rate
SSP £79.15 per week
SMP Six weeks at 90% of the employee’s average weekly earnings followed by a further 33 weeks at £123.06 per week or 90% of average weekly earnings – whichever is lower.
SPP One or two weeks’ pay at £123.06 per week or 90% of weekly earnings – whichever is lower. If the employee opts to take two weeks’ leave, they must be taken together.
SAP 39 weeks at £123.06 per week or 90% of weekly earnings – whichever is lower.

The above rate of SSP will apply from 6 April 2009 and from 5 April 2009 (the first Sunday in April) for SAP, SMP and SPP for employees earning over £95 per week in 2009-10 (£97 per week in 2010-11).
You may also have to pay an employee redundancy pay. Redundancy pay is based on an employee’s age and the length of time they have worked continuously for you (up to a maximum of 20 years). You are required to pay:

  • 1.5 weeks’ pay for each year’s service over the age of 41
  • one week’s pay for each year’s service between the ages of 22 and 40
  • 0.5 week’s pay for each year’s service up to the age of 21

There is a limit on the amount of a week’s pay that can be taken into account when entitlement is calculated. The limit is £380 per week with an overall maximum of £11,400 from 1 October 2009.