Stay out of the crossfire: help your employees stay ahead of the game for tax

What happens every March, every year? Financial hysteria. Everyone seeking to organise their affairs before the tax year ends on 5 April. If you work in finance there’s many long days to be done. If you’re involved in HR there’s many employees with queries to be answered, and many of us will have some financial spring cleaning to do if we want to pay less tax and make the most of our various allowances.

Many of our HR colleagues will have already dealt with countless financial questions in the build up to the tax return deadline. Some queries are easy to answer, just pass on a little information. However, some of the more technical tax questions are trickier, especially if someone is asking specifics about their own circumstances. It’s very easy to get drawn into a discussion you didn’t mean have, and verge on giving an employee financial advice that you’re not qualified or authorised to provide.

Staying the right side of the line

So how do you stay the right side of the advice line, whilst still being a supportive employer? Answer: get someone else to give them all the information so that they’re not basing their decisions on what you’ve said. Organise some financial wellbeing workshops, delivered by experienced and qualified individuals, who know exactly what facts and guidance to offer. Tax legislation, particularly for high earners, is extremely complicated; let someone help you tackle those tortuous topics.

If you haven’t done this within your organisation before, start sourcing your provider as soon as possible. You’ll need to find a company you’re happy with, agree the content of the workshops to be delivered, and sign off how those sessions are promoted. It’s all reasonably quick to do, but obviously has to fit in with an already busy schedule, so get going now. The sessions need to be delivered to employees ahead of 5 April so that they also have time to take action based on the guidance.

What makes a good end of tax year financial workshop?

What should be covered in your end of tax year financial wellbeing sessions will obviously depend on your specific workforce. However, usually it’s your higher earners that would benefit most from additional support at this time of year. Typical topics to cover include:

Lifetime allowance (LTA)

Understanding the pensions LTA and how to keep within the limits for overall pension savings – or, if someone has ‘protected’ their allowance, making sure that protection is maintained. Amongst other things, people forget that some life assurance schemes could terminate this protection.

Annual allowance (AA)

The standard AA is currently £40,000. However, for those with income (not just earnings) over £150,000 this is tapered down (to a minimum of £10,000). Employees in their later working life may want to contribute heavily to their pension, so it is crucial they understand the tax-efficient limits.

Personal allowance tax trap

For anyone with income of over £100,000 per annum, the personal allowance is gradually removed.

Loss of child benefit

Once someone earns more than £50,000 they start to lose their entitlement to child benefit, resulting in a higher effective tax rate.

Dividend allowance

The changes to dividend taxation may have been an extra sting in the tail of a tax return for some recently. However, there are some simple steps that people can take to reduce the impact – for example, making full use of the increased individual savings account (ISA) allowance or transferring assets to a spouse or civil partner in order to make the most of both allowances.

People don’t often need much encouragement to save tax, but if an extra nudge is needed, the recent payment of tax bills should provide a nice incentive. The 2016/17 tax year will be fresh in the mind of many, and the next eight weeks provide an excellent opportunity to reduce next year’s tax bill. Keep yourself out of the financial tax minefield and send the complicated questions elsewhere; get some end of tax year workshops organised now.

James Biggs is consulting and wellbeing director at Lorica.

This article was provided by Lorica.