Employment Income - Tax Relief and Tax Planning Flashcards
What is the maximum tax relief available for pension contributions?
The higher of:
- £3,600
- Earnings for the year
Can additional pension contributions be made over the tax relief limits?
Yes, however these won’t give any tax relief.
What are the two types of pension scheme?
- Personal Pension Scheme
- Occupational Pension Scheme
What is a personal pension scheme?
- Organised by the taxpayer
- Contributions made net of tax (20%)
- Additional relief available for higher & additional rate taxpayers by extending the band.
What is an occupational pension scheme?
- Provided by the employer
- Contributions deducted directly from earnings
- PAYE then applied to remaining income (called a ‘net pay arrangement’)
Are employer contributions to a pension scheme a taxable benefit for the employee and is there a limit to such contributions?
No taxable benefit. No limit to contributions an employer can make.
What is Give-As-You-Earn (GAYE)?
Employee can request that employer pays some of their salary to a charity. Donations are deducted from gross salary before PAYE is applied.
What ways can an employee legally reduce their income from employment?
- Choose exempt benefits over taxable benefits
- Select benefits with lowest cash equivalent
- Ensure private use contributions are for car, not fuel.
- Pay in to company pension scheme
- Make payments to charity under GAYE
- Claim allowable deductions.
- Seek rewards in benefits rather than cash - no N.I for employee.
In what instance would commuting to work (no van) be an allowable expense?
When an employee is seconded to a temporary workplace for less than 24 months.
Give 5 specific allowable deductions.
- £4 a week deduction to cover household expenses when working from home.
- Fees & subscriptions to relevant professional bodies.
- Business travelling expenses.
- Occupational Pension Scheme contributions.
- Donations to charity under payroll deduction scheme.
