Author Archives: accounts

Tax-free redundancy payments

If redundancy strikes, you could receive up to £30,000 tax-free. Whether it’s statutory or a more generous employer offer, understanding your entitlements and the latest caps on weekly pay can make a real difference to your finances.

There is a tax-free threshold of £30,000 for redundancy payments, regardless of whether the payment is your statutory redundancy pay, or a more generous amount offered by your employer.

If you have been employed for two years or longer and are made redundant, you are typically entitled to redundancy pay. The legal minimum you are entitled to receive is known as "statutory redundancy pay." However, there are exceptions to this entitlement, such as if your employer offers to retain you in your current role or provide suitable alternative employment, and you refuse the offer without a valid reason.

The amount of statutory redundancy pay is determined by your age and length of service, and is calculated as follows:

  • Under 22: Half a week’s pay for each full year of service
  • Aged 22 to 40: One week’s pay for each full year of service
  • Over 41: One and a half weeks’ pay for each full year of service

Weekly pay is capped at £700, with a maximum of 20 years of service considered. The maximum statutory redundancy payment for the tax year 2024-25 is £21,000, with slightly higher limits applicable in Northern Ireland. The cap on weekly pay for redundancy calculations is expected to increase in April 2025, though details have yet to be announced.

Employers may opt to offer a higher redundancy payment, or you may be entitled to an increased amount based on the specific terms outlined in your employment contract.

Source:HM Revenue & Customs | 24-02-2025

The benefits of benchmarking financial results

Benchmarking financial results involves comparing a business’s financial performance against industry standards or competitors. This process offers numerous benefits, helping businesses identify strengths, weaknesses, and opportunities for improvement.

Firstly, benchmarking provides a clear understanding of a company’s position in the market. By comparing key financial metrics such as profit margins, costs, and revenue growth with peers, businesses can identify performance gaps and areas needing attention.

Secondly, it aids strategic planning. With insights from benchmarking, businesses can set realistic targets and develop informed strategies to enhance profitability and efficiency. For example, if a competitor achieves higher profitability through lower overheads, a business might explore cost-reduction strategies.

Moreover, benchmarking promotes continuous improvement. Regular comparisons highlight trends and potential risks, enabling proactive decision-making. It fosters a culture of learning, as businesses adopt best practices from industry leaders.

Lastly, benchmarking can enhance investor confidence. Demonstrating performance in line with or better than industry standards reassures stakeholders of a business’s stability and growth potential.

Overall, benchmarking financial results is a powerful tool for driving competitiveness, efficiency, and long-term success in today’s dynamic business environment.

Source:Other | 24-02-2025

Women in leadership roles

The UK is making significant strides in promoting gender equality within its top companies. According to the latest FTSE Women Leaders Review, women now occupy nearly 43% of board positions across FTSE 350 companies, totalling 1,275 roles. Additionally, women hold 35% of leadership roles, equating to 6,743 positions.

This progress indicates that the voluntary target of 40% women's representation by the end of this year is within reach for many businesses. Over 60% of FTSE 350 companies are close to achieving this goal, reflecting ongoing efforts to dismantle barriers and foster inclusive leadership.

Chancellor of the Exchequer Rachel Reeves emphasised the importance of this momentum, stating that while the UK leads in gender equality in boardrooms, continuous efforts are necessary to eliminate obstacles preventing women from ascending to decision-making roles.

Minister for Investment Baroness Gustafsson OBE highlighted the positive impact of female leadership, noting that strong female voices inspire change and add value throughout organisations.

Despite these advancements, challenges persist, particularly in increasing the number of women in top executive positions such as Chairs and CEOs. The government remains committed to collaborating with businesses to ensure equal opportunities for all, aiming to unlock economic growth and enhance living standards across the nation.

This concerted effort underscores the UK's dedication to fostering a diverse and dynamic business environment, recognising that inclusive leadership is key to driving innovation and economic success.

Source:Other | 24-02-2025

Self-employment cannot be used as a tax smokescreen for contracted employees

A complex celebrity case arose recently in which the First-tier Tax Tribunal (FTT) was asked to consider the application of the intermediaries’ legislation (IR35), otherwise known as off-payroll working, to payments made by Manchester United Football Club (MUFC) to Bryan Robson Ltd.

This appeal was in relation to determinations of income tax made under Reg. 80 of the PAYE Regulations and s31 of the Taxes Management Act (TMA) 1970  for personal appearances provided to MUFC by Bryan Robson Ltd. as a ‘global ambassador’ from 2015/16 to 2020/21. Those agreements included a licence for MUFC to exploit Mr. Robson’s “image rights” and required the former England star to make 35 personal appearances per year at MUFC’s request for a fixed sum. Although the image rights were not subject to the IR35 legislation and were left to be decided separately, and the additional tax due under the IR35 rules is to be determined.

This technical tax case highlights the intricate factors that determine employment status under IR35 and anyone providing such personal services, including freelancers, content creators, and contractors, has to demonstrate a high level of autonomy to be considered truly self-employed and present watertight contracts to the HMRC. 

Source:Other | 20-02-2025

Gifts exempt from Inheritance Tax

Navigating the intricacies of Inheritance Tax (IHT) can be daunting, but understanding the available gift exemptions and strategic planning can significantly reduce potential liabilities. By effectively utilising annual allowances, small gift exemptions, and planning for special occasions, you can ensure more of your wealth is passed on to your loved ones tax-free.

There is an annual Inheritance Tax exemption of £3,000 for gifts, which can be carried forward to the following tax year if not fully utilised. This allows for a maximum gift of £6,000 within a qualifying two-year period. Additionally, you can give as many gifts of up to £250 per person as you wish throughout the tax year, provided you have not already used another exemption for the same individual. There are also special allowances for gifts made on the occasion of a wedding or civil ceremony. These gifts are excluded from the Inheritance Tax calculations in the event of the donor’s death within seven years of making the gift.

Wealthier individuals may also have the ability to make tax-exempt gifts and payments that are funded from their income. With proper planning, this can be an effective strategy, allowing grandparents, for example, to contribute towards their grandchildren’s school fees without incurring tax liabilities.

However, careful planning and consideration are essential to ensure that these payments are deemed to be part of the transferor’s normal expenditure and are made from income rather than from capital. It is also important to ensure that the transferor retains enough income to maintain their usual standard of living after making the gift, as the arrangement must not cause any financial hardship to the giver.

Source:HM Revenue & Customs | 17-02-2025