Statutory and Non-statutory Deductions Flashcards
What statutory deductions is a businesses required to take from the gross pay?
Pay as you earn (PAYE)
National insurance contributions
Student loans
Pensions
What is pay as you earn? (PAYE)
PAYE is the system for calculating and applying deductions for income tax in the UK
How does a business know how much each employee should be taxed?
By the employees tax code
What does tax code look like?
Tax code is numbers followed by a letter
In terms of employee pay what is an employees personal allowance?
An amount of their pay that they don’t get taxed on within one year
How would you work out an employees personal allowance?
You would multiply the number elements of their tax code by 10
Why would an employees tax code change within a tax year?
Because the employee has paid too much or too little tax in the past
What is national insurance?
National insurance is a compulsory payment made by employees and employees to fund benefits for people who are sick, unemployed or retired
When will employees pay class one national insurance?
Once their pay exceeds £175 per week
How much in a percentage is class one national insurance?
13.8%
What is an employment allowance?
A scheme that allows employers to reduce their national insurance liability
How can a business qualify for employment allowance?
By having its national insurance liabilities in the previous tax year less than £100,000
How much can a eligible employers reduce their national insurance liability whilst using employment allowance?
£5000 a year
What non-statutory deductions can be taken away from an employees pay?
Charitable giving
Union membership fees
Private medical insurance
Saving schemes
What parts are an employees pay? Goes to HMRC?
Income tax
Employees & employers national insurance
Student loan repayments
