Chapter 7 - Introduction to PAYE

Question 1

PAYE Incomes

Answer 1

1) PAYE employment income
2) PAYE pension income
3) PAYE social security income (sick pay & mat leave)

Question 2

Readily Convertible Assets

Answer 2

Something that can be turned into cash very quickly e.g stocks. Subject to PAYE

Question 3

Benefits

Answer 3

If the employer provides an asset which can be turned into cash by surrender, the amount of the benefit is subject to PAYE.
An employer can register with HMC to include taxable benefits in the payroll

Question 4

Tax Code

Answer 4

Issued by HMRC. Tells employer how many allowances or reliefs an employee is entitled to.

Question 5

Calculation of Tax Code

Answer 5

Tax code is the personal allowance and is adjusted:
PA
Add allowable expenses paid by employee
Less cash equivalent of non cash emp benefits
Less adjustment for underpaid tax (amount underpaid grossed up)
PAYE code = total allowances less deductions x 1/10 rounded down to a whole number
Code L = entitlement to basic PA
K codes = where benefits exceed allowances.
S codes = Scottish taxpayer