Income Tax Flashcards
what are taxable benefits for employment income subject to class 1A NI?
Company Car
Fuel
Van
use of own car- mileage allowance
living accommodation
use of assets/gift of assets
beneficial loan interest
- time apportion if less than 12 months
deduct contrib from employee except fuel
How is the accommodation benefit calculated?
-Accommodation costing £75k or less:
taxable benefit will be higher of:
- annual value of property and rent paid by employer
- Accommodation costing more than £75k and owned by the employer will be
- the basic charge plus expensive accomodation charge
expensive accommodation charge is (C-75k) * ORI
cost= current MV if property owned for more than 6 years
- any capital improvement to property in prior tax year they will be added to cost.
if employer pays for glas * elec, repairs and furtniture there is further 20% benefit- if for job related purposes then 10%.
formula for beneficial loans?
There are two methods to use to calculate the amount of the taxable benefit:
1. The average (simple) method - average amount of loans outstanding in tax year
(balance o/s at start of tax year + balance o/s at end of tax year)/2*OCI
If loan taken out after the start of the tax year or repaid before the end of the tax year,
then use those dates instead in the formula, and then pro-rate the answer by the
number of months the loan was available in the year.
2. The precise (accurate) method
Work out the balance outstanding day by day throughout the tax year
Use of assets forumla?
Where an employee is provided with an asset for their personal use, the taxable benefit is based on 20% of the asset’s market value at the time the asset is first provided.
- if sold or given to employee- further tax higher of market value at the date employee acquires asset
- MV when first given to employee less any amount assesses as benefits.
EXAMPLE 4
Joe is employed by Firstly plc. On 6 April 2022, the company provided him with a home entertainment system costing £4,400 for his personal use. Firstly plc gave the home entertainment system to Joe on 31 December 2022 for free, although its market value on that date was £3,860.
The taxable benefit for the use of the home entertainment system is £660 (4,400 x 20% x 9/12).
The taxable benefit for the gift of the home entertainment system is the market value of £3,860, because this is greater than £3,740 (4,400 – 660).
what are the exempt benefits?
employer contributions to occupational pension schemes
subsidised canteen at work as long as available to all employees
provision of one mobile phone for private use
workplace nursery
relocation and removal expenses up to £8,000 p.a
trivial benefits (cost to employer < £50 per gift)
car parking space at work
work buses
loans of bikes
incidental expenses from overnight stays as a result of work trips up to £5 for
UK stays and up to £10 overseas per night
up to £6 per week for homeworkers - additional amounts may be exempt
with supporting evidence
3rd party entertainment
recreational or sporting facilities not open to general public
training
medical treatment up to £500 each year per employee
eye tests/glasses for computer work
staff suggestion schemes up to £25
long service awards of up to £50 per year of service for employment of 20
years or more
what are the Car benefits to employee
if emissions above 55 then round down to nearest whole number and divided by 5 e.g. 16% + 8% ((95 – 55)/5))
- there is an addtional 4% surcharge for diesel car not meeting the RDE2 standard.
- maximum percentage restriction is 37%. also prorate benefit to use in the year.
what is the fuel benefit?
flat rate 25,000 * car percentage
who pays which NIC rates?
Class 1 NIC- salary, bonuses, vouchers- payable by employees and employers
Class 1A NIC- paid my employer on employee benefits
Class 2 NIC- payable by self employed flat rate £3.05 each week.
Class 4 NIC- payable by self employed on trading profits
