Author: Glenn

Have you set up a suggestion scheme for ideas that could save or earn you money? Employee suggestion schemes can offer up to £5,000 tax-free for valuable input — and even £25 for smaller efforts. A win for innovation and your employee payslip!

An employee suggestion scheme can offer many advantages for businesses, not only in terms of the valuable insights and innovations employees contribute but also through the potential for significant tax-free rewards. These schemes can help businesses save money, drive new business, and foster a culture of continuous improvement, all the while offering employees incentives for their contributions.

HMRC outlines two types of awards that businesses can offer employees under such schemes:

1. Encouragement Awards – These are given for good suggestions or to reward employees for special efforts. Encouragement awards are exempt from both tax and National Insurance contributions up to a limit of £25. Any amount paid above £25 will need to be processed through the payroll and taxed accordingly.
2. Financial Benefit Awards – These are offered for suggestions that have the potential to save or generate money for the business. The financial benefit awards are exempt from tax up to a generous cap of £5,000. The exempt amount is determined by the greater of:
   • 50% of the money you expect the suggestion to save or generate for your business in the year following its implementation.
   • 10% of the money you expect the suggestion to save or generate for your business over the first five years after its implementation.

In addition to these conditions, there are other reasonable criteria that must be met for the payments to be considered tax-free. These criteria are designed to ensure that the awards are made in a structured and transparent manner.

Want to make the most of your pension savings? You could claim up to 45% tax relief on contributions, plus carry forward unused allowances. Here’s how to boost your retirement pot with generous HMRC incentives.

Tax relief on private pension contributions is generally available up to 100% of your annual earnings, subject to specific limitations. The relief is applied at your highest rate of Income Tax, which means:

• Basic rate taxpayers are eligible for a 20% pension tax relief.
• Higher rate taxpayers can claim a 40% pension tax relief.
• Additional rate taxpayers are entitled to 45% pension tax relief.

For individuals paying the basic income tax rate, the initial 20% pension tax relief is typically applied automatically by their employer.

Higher and additional rate taxpayers can claim the additional relief through their self-assessment tax return as follows:

• An additional 20% relief on income taxed at 40%
• An additional 25% relief on income taxed at 45%

Alternatively, if taxpayers are subject to 40% income tax and do not submit a self-assessment return, they may contact HMRC directly to request the relief.

These tax relief rates apply to taxpayers in England, Wales, and Northern Ireland. It is important to note that Scotland has some regional variations for Income Tax rates.

Furthermore, there is an annual allowance of £60,000 for pension tax relief. Taxpayers have the opportunity to carry forward any unused portion of this allowance from the previous three tax years, provided they made pension contributions during those years. As of 6 April 2023, the lifetime limit for pension tax relief was abolished, offering greater flexibility in pension contributions without the previous lifetime cap.

Redundant? You could receive up to £30,000 tax-free, whether it’s statutory pay or a better deal from your employer. Know your rights, check the 2025-26 limits, and understand how your age and service affect your payout.

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

If you were made redundant on or after 6 April 2025, your weekly pay is capped at £719. A maximum of 20 years of service taken into account. The maximum statutory redundancy payment for the tax year 2025-26 is £21,519.

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.

Struggling with unpaid invoices? If you've paid VAT to HMRC but never received payment from your customer, you may be able to reclaim that VAT. Learn how bad debt relief works and whether switching to cash accounting could ease your VAT woes.

The VAT bad debt relief provisions enable businesses to reclaim VAT that has been paid to HMRC when a customer fails to pay for goods or services within a reasonable period. This typically applies when an invoice has been issued, but payment has not been received for an extended period (usually six months after the due date).

Under standard VAT accounting procedures, businesses are required to account for VAT at the time an invoice is issued, regardless of whether payment has been received. However, businesses can claim bad debt relief if specific conditions are met.

The primary conditions for claiming bad debt relief, as outlined in HMRC’s guidance, include:

1. The VAT on the supply must have already been accounted for and paid to HMRC.
2. The debt must be written off in the business’s regular VAT accounts and transferred to a separate bad debt account.
3. The value of the supply must not exceed the usual selling price.
4. The debt should not have been paid, sold, or factored through a valid legal assignment.
5. The debt must remain unpaid for at least six months after the later of the payment due date or the supply date.

It is important to note that businesses using the cash accounting scheme, or those that use certain retail schemes, only account for VAT on the amounts they have actually received from customers. As such, businesses operating under these schemes are generally not required to make bad debt relief claims, as VAT is only paid once payment is received.

Small businesses experiencing significant issues with bad debts may find it beneficial to apply for the cash accounting scheme, as this can help mitigate VAT liabilities by deferring payment until the customer settles their debt.

Use a company car for personal trips? Avoid a hefty tax charge by reimbursing your employer for private fuel by 6 July 2025. It’s called “making good” – and it could save you a chunk in tax if your private mileage is low.

To avoid the car fuel benefit charge, an employee must "make good" the cost of all fuel used for private journeys no later than 6 July following the end of the relevant tax year. This means that the employee needs to reimburse the employer for any private fuel used during the 2024-25 tax year by this deadline to prevent any tax liabilities related to the fuel benefit.

When an employee is provided with fuel for private use in a company car, the default rule is that the employee is required to pay the car fuel benefit charge. This charge is calculated based on the car's CO2 emissions rating and is applied to the car fuel benefit multiplier. This has just increased to £28,200 for 2025-26 (2024-25: £27,800).

However, the car fuel benefit charge can be avoided if the employee repays the employer for all private fuel, a process known as "making good." Private fuel use includes fuel used for commuting to and from work.

By making good, HMRC will accept that no car fuel benefit charge applies, allowing the employee to avoid the income tax charge on private car fuel. Typically, it is more beneficial for an employee to reimburse the employer for the private fuel rather than pay the Income Tax charge, especially if private mileage is low.

If the employee does not demonstrate that they have repaid all fuel costs associated with private journeys (including commuting), the car fuel benefit charge will still apply. Therefore, it is crucial for employees to maintain accurate records of private mileage and ensure that all fuel costs for private use are fully repaid by the deadline to avoid unnecessary tax charges.