The Budget 2014 Debugged (Part 3) – The Employment Allowance

We’re following on from our last Budget 2014 post and bringing you more information about it; this time we’ve got all the facts on Employment allowance debugged.

So what is Employment Allowance?

‘The Employment Allowance’ is part of the Government’s ongoing package for businesses and charities that have employees who incur an employer secondary Class 1 NICs liability.

Since 6^th April 2014, these companies are entitled to claim back (i.e. reduce) a maximum of £2,000 every tax year from their employers Class 1 National Insurance (NIC).

Who can and cannot claim the allowance?

Most employers and charities in the UK will be able to claim the Employment Allowance. However, there are some exceptions. For example, if you:

·      Employ someone for personal, household or domestic work, such as a nanny or care support worker

·      Already claim the allowance through a connected company or charity

·      Are a public authority (including local, district, town and parish councils)

·      Carry out functions either wholly or mainly of a public nature. This is different if you have charitable status such as NHS services.

Moreover, self-employed people are not eligible for the Employment Allowance. The policy overlooks the majority of small businesses, freelancers and contractors. This is primarily due to the self-employed paying Class 2 and Class 4 National Insurance Contributions.

How do you claim Employment Allowance?

The main way to claim Employment allowance is through commercial Payroll software such as Sage One Payroll. This will reduce your monthly (or quarterly) Class 1 NIC liability to HMRC.

For example if your monthly employers Class 1 NIC bill is always £1,200, in April you can offset £1,200 of your Employment Allowance and then use the remaining £800 in May to take the maximum allowance of £2,000.

How much impact will this scheme have? 

The Government estimates that 1.25 million businesses will be able to take advantage of the Employment Allowance. Moreover, if everyone of those businesses utilised the scheme, a total of £2.5 billion will be wiped off the tax bills of UK businesses.

Money Matters (Part 4) – Employed vs. Self Employed

Over the years, it seems that traditional views of what work is are being eroded by the new ideas of employment. Primarily, the discussion of “am I employed or self-employed?” or “which is better?” is a regular debate. We at Finnies have decided to debug some of the myths surrounding employment and self-employed and hopefully answer any questions you might have.

Employed?

In order to answer the question, one needs to determine what kind of contract you have. There are two main forms: A contract of services (for employees) and a contract for services (for self-employed people or independent contractors). In order for you to determine the nature of a contract, you can ask yourself a few questions; if you answer ‘Yes’ then chances are you are employed:

1.     Do you have to do the work yourself?

2.     Can someone tell you at any time what to do, where to carry out the work or when and how to do it?

3.     Can you work a set amount of hours?

4.     Can someone move you from task to task?

5.     Are you paid by the hour, week, or month?

6.     Can you get overtime pay or bonus payment?

Whilst the prospect of being employed may be a deterrent to some, there are many advantages to being employed as opposed to self-employed – you receive a regular and consistent pay packet, your employer has a responsibility for your wellbeing, and you can sit back without worrying about your job stance the week after. Similarly, if you earn a reasonable wage, your mortgage and lifestyle may be dependent on your income.

One main advantage of being employed is maternity leave packages; when you’re self-employed you lose holidays like this. Additionally, other benefits of employment include:

·      Holiday pay

·      Sick pay or Statutory Sick Pay (SSP)

·      A secure position in an organisation

·      A regular guaranteed income

·      Working with other people

·      Access to workplace pension schemes

Self-Employed?

The option of being self-employed is an interesting concept. The Internet has produced a wide range of self-employment opportunities in the creative industries, such as working freelance for an established company, or setting up your own net-based business working from home.

Similar to being employed, in order to deduce whether you’re self employed you can ask yourself a series of questions:

1.     Can you hire someone to do the work or engage helpers at your own expense?

2.     Do you risk you’re own money?

3.     Do you provide the main items of equipment they need to do you’re job, not just the small tools that many employees provide for themselves?

4.     Do you agree to do a job for a fixed price regardless of how long the job may take?

5.     Can you decide what work to do, how and when to do the work and where to provide the services?

6.     Do you regularly work for a number of different people?

7.     Do you have to correct unsatisfactory work in your own time and at your own expense?

Again, if you answer ‘Yes’ to these questions, then you are self-employed. However, whilst this prospect of self-employment can seem initially inviting, there are several dangers involved. For example, you may not be on a regular payroll. Also, there’s a lack of sick pay and maternity leave and also a pension scheme.

However, there can be some major advantages to being self-employed, including:

·      You can be your own boss

·      You can run the business how you want

·      Flexible working hours

·      Reap your own rewards

·      Earn money for yourself

·      Create your own success story

We hope that this has debugged some of the mysteries surrounding the debate of Employed vs. Self-Employed. For more information on this you can visit our website, or specifically or Self-Employment page. Should you have any queries, you can phone us on 01482 861919 or email enquires@finnies.org.uk.

Money Matters (Part 3) - Money Saving Tips for University

It can be a stressful time for students embarking on to university life for the first time. The fear of going into debt, or meeting new people, or even a fear of being homesick – we’ve all been there. So to help out all the students out there we’ve decided to put together a list of top money saving tips.

Tip #1: Budget during your first week

Everyone loves the thought of Freshers Week – the thought of meeting new people, having a good time, but at the bottom of the list of thoughts is that fact you will potentially spend a lot of money during the first week. Some students have even said they spent their entire loan!

So, top of the list of tips has got to be budget during your first week. This can be something quick, for example allocating different amounts of money per day so you know you’re not going to overspend. You can also buy budget books from any stationary shop if you want to write all of your budgets down.

An effective way to save money and budget with night-outs is to actually pre-drink. Pre-drinking will save you money on drinks in the nightclub, meaning you’re happy because you’re having a great night and you are being cost effective!

Tip #2: Plan your meals

Planning your meals can be a very effective way of reducing costs, especially if you buy in bulk. This means you’ll know what food you need rather than panicking and buying more food last minute.

Tip #3: Student Discounts

Lots of places offer these! We highly recommend you invest in a NUS Card. These are super cheap and only cost £12 for a year (literally £1 a month)! For such a low price you get access to discounts to a variety of stores and companies, ranging from Topshop and Amazon to Dominoes and Odeon. You can even go as far as get discounts on holidays with companies such as easyJet and LateRooms.com

Another worthwhile investment is a 16-25 Railcard. This gives you a whopping 33% discount on all rail fares.

Tip #4: Textbooks

It’s inevitable; you’re going to end up buying textbooks for your degree. However, what do you do when you’ve exhausted your use for it? A good idea is to sell it second hand to the year group below to get a bit of money back. Similarly, buying your own copy second hand from someone else will most likely save you money instead of buying a brand new one.

Tip #5: Catch-up TV

Most students when they come to university think about bringing their TV. What they don’t realise is that you need to pay for a TV licence to legally receive your channels. More so, this also applies if you wish to watch programs live on iPlayer – you still need a license to watch programs live whatever platform it’s on.

So instead, why not use Catch Up TV and watch the program after it’s original broadcast? This saves you money since you don’t have to pay for a license to watch programs after it’s broadcast.

So there you go, those are our top money saving tips for University and on behalf of all the staff at Finnies, we’d like to wish all new students the very best of luck with their degrees.

Money Matters (Part 2) - Gross Income vs. Net Income

Pop quiz! – What’s the difference? Not sure? Well, we’re here to let you know the big differences between Gross income and Net income.

Income for Individuals

For an individual, gross income is defined as all income you receive in the form of money, goods, property and services, which are not exempt from tax. If you are employed, your gross income will also include all amounts from working including bonuses.

Your net income is then the amount after all deductions have been made from taxes, insurance, etc.

Income for Businesses

For businesses it is slightly different. Here, the gross income is the summary of all the income your business earns.

To calculate this, you must combine the total of all cash, cheques, and credit card charges, credit card charges, rental income, interest and dividends, canceled debts, promissory notes, kickbacks, damages and lost income payments your business received during the year. Even if your business routed the money to a third party, you must still claim it as income. You shouldn't deduct any expenses when calculating your gross income.

To calculate your net income, you must deduct business expenses from your gross income. These typically are expenses such as cost of good sold, advertising expenses, insurance, legal fees, office expenses, maintenance, etc.  Similarly, if you use a portion of your home for business purposes, you may be able to deduct expenses for the maintenance of the space.

Calculating your gross and net income allows you to identify your largest expenses, thus allowing you to make improvements.