w4 Flashcards
Benefits in Kind
Items provided by the employer in addition to gross salary.
Ee NIC applied to cash payments, so BIK does not attract any.
Er NIC is applied to BIK however “Class 1a”.
Why not just increase gross pay?
Cheaper – health insurance policy for 1,000 people less than 1 policy for 1 person (x1,000)
No employee NIC
Corporate culture? Happy, healthy workers? Improve morale?
exemptions BIK
Sports facilities (in-house); Staff canteen (free or subsidised meals available to ALL employees); Gifts (small); Parties, functions & meals (up to £150); Cycle to work; Relocation (up to £8,000); On-site childcare; Work from Home (£6 per week / £26 per month); Trivial (<£50); Car parking Electricity to charge a car (and charging point at employees home); Broadband; Counselling; Redundancy (benefit?!) £30,000 tax free
Pensions
Contributions into a pension scheme are deducted from gross pay before tax and NI
calculated.
Tax benefit therefore = top rate of tax (45%/40%/20%)
Employer contributions not taxable either (and do not attract Ers NIC).
When a pension is being drawn, it is taxed in the same way as wages.
Pension Limits
Limits:
Lifetime limit £1,073,100
Annual limit £40,000 (22/23 increased to £60,000 23/24) (or 100% of salary
if less)
Auto-Enrolment
Pensions are now compulsory (kind of)
Employee minimum contribution = 5%
Employer minimum contribution = 3%
Company Cars
A company car is a vehicle made available to an employee for business and personal use.
A company car that has NO personal use is called a “pool car”. These are vehicles that are
stored on the company premises, and ONLY used by employees on work business.
Pool cars are not a benefit.
Company Cars - BIK
BIK Rate – based on fuel, range, CO2 emissions
Car BIK - list price x BIK Rate
Fuel BIK - fuel benefit charge (£25,300) x BIK Rate
Employee contributions:
towards purchase max £5k = deducted from list price
towards running costs = deducted from BIK (not for insurance)
towards personal fuel = no change to calculations
100% of personal fuel = no fuel charge
Vans
if personal mileage allowed, BIK is a flat rate £3,600
Exemption If van produces 0g/km reduced to nil
Fuel benefit flat rate of £688 unless ALL reimburse.
Loans
Up to £10,000 loaned – no benefit
Over £10,000 the entire loan/s considered
Official rate of interest set by HMRC (2022 to 2023 2.00%)
If loan attracts rate of interest < official rate, difference is the benefit received
If loan attracts rate of interest > official rate, ignore that loan (no netting off)
Mobile Phones
As long as the contract is in the employers name, NO benefit. (One per employee)
Reimbursing an employee though is 100% benefit received.
Employee Expenses
Employees incurring expenses during their work that are reimbursed by employer incur NO tax (no gain/loss).
Employees incurring expenses during their work that are NOT reimbursed can be offset against employment income providing that:
1. Obligation to incur expense, not a preference. “necessary for employment”
AND
2. Wholly and Exclusively
Partial reimbursement allows for the difference to be claimed.
