Week 4

• What is taxable ​

  • Wages, salaries, bonuses, commissions, fees​
  • Wages made on termination of employment​
  • Pensions arising from employment​
• What is taxable ​

  • Certain social security benefits, including the state retirement pension, statutory sick pay, maternity pay and paternity pay​
  • Benefits in kind​
• Benefits which are not taxable continued:​

  • "Green commuting" benefits​
  • Contribution to home expenses if working from home £6 per week​
  • Approved mileage​
  • Removal expenses up to £8,000 per year​
• Benefits which are not taxable continued:​

  • Award under £5000
  • Non- cash long serving award​
  • Employer's contributions to a registered pension scheme​
• • Some expenses can be offset against employment income thereby reducing the taxable income from that source.​
• Wholly, exclusively and necessarily incurred in the performance of the duties of the Employment​
• BENEFITS IN KIND​

  • Season tickets (for travel, sport games etc)​
  • School fees paid by the employer​
  • Beneficial loans provided by the employer​
  • Private health insurance​
  • Living accommodation​
• BENEFITS IN KIND​

  • Ancillary services connected with living accommodation​
  • Assets loaned for private use​
  • Cars and fuel provided for private use​
  • Vans provided for private use​
• Living accommodation​

  Basic taxable benefit  for employee​

  is higher of:​

  ​  annual value - what the employer​

   could earn if would rent this property​

   on the market.​

  ​annual rent - if employer rents it from​

   another company and provide to an employee.​
• Living accommodation​

  • The taxable benefit is reduced by any contribution made by the employee.​
• Expensive living accommodation ​

  Additional taxable benefit  for employee if the property cost more than £75,000, calculated as:​

  (£cost of the property - £75,000) x 2.25
• cost of a property is equal to its purchase price, plus the cost of any improvements made before the start of the tax year, less any capital contribution made by the employee.​
• If the house was owned by the employer for more than 6 years before occupation by the employee, market value at occupation may be substituted for cost.​
• No taxable benefit arises in relation to "job-related" living accommodation provided for an employee. 
• Job-related accommodation​

  • necessary for the proper performance of the duties of the employment​
  • provided for the better ​performance of duties and ​this is customary​
  • provided for security reasons​

  ​
• An employee who is provided with living accommodation is also taxed on the cost to the employer of providing any "ancillary services" such as heating, lighting, cleaning etc.​

  ​If the accommodation is job-related, the taxable benefit in relation to ancillary services cannot exceed 10% of the employee’s net earnings.​
• The employee is taxed annually on 20% of the market value of the asset on the date of the loan​
• • If the asset is subsequently given or sold to the employee, he or she is taxed on the higher of:​

  1. the market value of the asset at the date of transfer, less any amount paid for the asset by the employee​
• A "beneficial loan" is one which is granted by an employer to an employee (above £10,000) either interest-free or at a rate of interest which is below the official rate of interest.​

  • How we calculate benefit in kind?​

  amount of loan x ( 2.25%   -    the rate of loan) = B-I-K​
• • If the amount of a beneficial loan varies during the tax year, there are two methods of calculating interest for the year at the official rate:​
  • Normal method:​
  • The amounts of the loan at the start and at the end of the tax year are averaged and multiplied by the average official rate for the year​
• Price of a new car (including additional accessories)​

   x  ​

  Applicable percentage based on CO2  emission​
• Price of a new car is reduced by capital contribution made by the employee up to a maximum of £5,000
• • There is an additional 4% supplement for diesel cars, which do not meet the Real Driving Emissions 2 (RDE2) standard. The first such cars are now coming on to the market. Company diesel cars meeting the RDE2 standard are treated as if they were petrol cars.​
• • The maximum taxable benefit in all cases is  37% of list price.​
• • If the car is not made available for the whole tax year, or is off the road for 30+ consecutive days, the benefit is reduced proportionately​
• • Any amount paid by the employee towards running costs (apart from fuel) reduces the taxable benefit, not the car price​
• Fuel provided to an employee for private use gives rise to a further taxable benefit in kind​

  £27,800                x     Applicable percentage                                                            
• If a motor van is made available for an employee’s private use, there is a taxable benefit in 2023/24 of £3,960

  • Where any private fuel is provided there is an additional taxable benefit of £757​
• • These charges are reduced​ proportionately if the van​ is not provided to the​ employee for the whole ​of the tax year​
• • Taxpayers are assessed upon income payments arising from employment.​
• • Such monies can be monetary or non-monetary rewards to employees.​
• • Expenses are allowed against income if they are wholly, exclusively and necessarily incurred in the performance of the duties of the office or employment​