Employment income Flashcards
Define employment income
Money or money’s worth arising from employment
How is employment income calculated?
salary + bonus + benefits
When is the P60 completed?
At the end of the tax year
What information is included in the P60?
- Gross pay
- Tax deducted
- NICs paid by both employee and employer
What is the basis of assessment for employment income?
Employment income is taxed on a receipts basis
When are earnings deemed to be received?
On the earlier of the payment date or the date when the individual becomes entitled to the payment
Which pension benefits are exempt from employment income?
- Employer’s contributions into a registered pension scheme
2. Pension advice and associated tax planning available to all employees up to £500 per tax year
When is a free/subsidised canteen exempt from employment income?
- On-site
2. Available to all employees
When is a car parking space exempt from employment income?
At or near place of work
Up to what amount are social events exempt from employment income?
Up to £150 per annum per head
When are bicycles and cycling safety equipment exempt from employment income?
When available to all employees
What sort of childcare is exempt from employment income?
- Workplace nurseries and childcare
- For those already in a scheme at 6 April 2011, up to £55 per week is exempt
- For those joining from 6 April 2011 to 4 October 2018, exemption is £55 per week for basic taxpayers, £28 per week for higher rate taxpayers
- For additional rate taxpayers joining from 6 April 2011 to 5 April 2013, £22 is exempt
- For additional rate taxpayers joining from 6 April 2013, £25 is exempt
Up to what amount are removal expenses exempt from employment income?
Up to £8000
Up to what amount are awards made under a staff suggestion scheme exempt from employment income?
£5000
Up to what amount are personal incidental expenses when working away from home exempt from employment income?
- £5 per night in the UK
- £10 per night when working abroad
- If the limit is exceeded then the whole payment is taxable
When are glasses and eye tests exempt from employment income?
For employees who use VDUs
How many health screening assessments and medical check ups are exempt from employment income?
One per year
When are non-cash long service awards exempt from employment income?
- For over 20 years’ service
2. Maximum £50 per year of service
Up to what amount is medical treatment to help the employee return to work exempt from employment income?
Up to £500 per annum
When is a benefit trivial?
When it meets all three of the following conditions:
- The cost of providing the benefit does not exceed £50
- It is not cash or a cash voucher
- It is not provided in recognition of services
What is the P11D used for?
For employers to provide HMRC with details of the benefits provided to each employee during the tax year
What is the tax treatment of a cash voucher?
Amount for which the voucher can be exchanged
What is the tax treatment of a credit token?
Cost to the employer less any amount paid by the employee
What is the tax treatment of a non-cash voucher?
Cost to the employer, less any amount paid by the employee
What are the requirements of job-related accommodation?
- Necessary for performance of duties
- Customary to be provided
- Provided for security
What conditions must a director fulfil in order to qualify for job-related accommodation?
- Own no more than 5% of shares in a company
2. Be a full-time working director (not applicable if the company is not-for-profit
How is the benefit of not job related living accommodation calculated when the employer rents the property?
The higher of the annual value and the rent paid by the employer
How is the benefit of not job related living accommodation calculated when the employer owns the property?
- The rateable value
2. An additional benefit must be calculated if the original cost of the house exceeds £75,000
How is the additional benefit of not job related living accommodation calculated when the employer owns the property?
(cost - 75,000) x official rate of interest at the start of the tax year
How is the cost of not job related living accommodation calculated when the employer owns the property?
- Generally the original value when the property was purchased
- If the employer owned the property for more than six years before the employee moved in, then must use the market value at the date the employee moved in
- Include any capital improvements between the date on which cost is determined up to the start of the tax year
What is the rate of interest from 6 April 2017?
2.5%
How is the benefit calculated for cars provided for private use?
manufacturer’s list price x CO2 emissions %
How is the taxable benefit calculated on assets lent for private use when the employer owns the asset?
annual value = 20% x market value
How is the taxable benefit calculated on assets lent for private use when the employer rents the asset?
Benefit is the higher of the annual value or the rent paid by the employer
Define PAYE
- Pay as you earn
- The system used for collecting income tax and national insurance from cash earnings
- Also used to record non-cash benefits and, under voluntary payrolling, is used to collect tax on such benefits
When is income tax and NIC deducted due for payment?
- 14 days after the tax month ends
- 19th of each month
- Extended to 22nd for electronic payment
When does HMRC require security?
Where payment is seriously at risk:
- Deliberately not paid NICs or PAYE
- Built up large debts
- Not responded to HMRC’s attempts to contact them
What is the punishment for failure to provide security?
Fine up to £5000
What is the purpose of P2?
To provide details to employees about how the PAYE code has been calculated
What is the purpose of P9(T)?
Provides the PAYE code to the employer
When calculating PAYE code, what are classed as allowances?
- Personal allowances
- Allowable expenses
- Adjustment for overpaid tax
When calculating PAYE code, what are classed as deductions?
- Taxable benefits
2. Adjustment for underpaid tax
How is PAYE calculated when allowances are higher than deductions?
- Take net figure (allowances - deductions)
- Remove last digit
- Add letter L
How is PAYE calculated when allowances are lower than deductions?
- Take net figure (deductions - allowances)
- Remove last digit
- Deduct 1
- Add letter K to the start
