WORKING FOR OTHERS Few avoid working for others at some time in their life and most will have encountered the PAYE system operated by employers to collect the income tax and national insurance contributions (NICs) due on
Valuation Rules were introduced from April 2017 which may affect the value of a benefit. Where a benefit is taken rather than an alternative cash option, the taxable value of the benefit is the higher of the cash foregone or the taxable value under the normal benefits rules. Contact us for the correct valuation of benefits. Company cars Employer provided cars, commonly known as company cars, remain a popular benefit and for some a real status symbol, despite the tax charge they give rise to. The charge on cars is generally calculated by multiplying the list price of the car by a percentage which depends on the CO 2 emissions (recorded on the Vehicle Registration Document) of the car. You then pay tax at 20%, 40% or 45% on this charge depending on your overall tax position. The tax rates applicable to Scottish taxpayers range from 19% to 46%. The table shows the percentages for 2021/22. The table is divided into two columns for cars registered up to 5 April 2020 and those registered after that date. The table reflects the differences between the newWorldwide harmonised Light vehicle Test Procedure (WLTP) and the New European Driving Cycle (NEDC) test it is replacing.
rates and bands which apply across the rest of the United Kingdom (see the ‘A few essentials’ section of this guide for details of rates and bands). For Welsh taxpayers a letter 'C' is included in the tax code. For 2021/22 Welsh taxpayers pay the same overall rates of income tax as taxpayers in England and Northern Ireland. With so many complications and some guesswork involved, getting the code exactly right can be difficult and the right amount of tax will not always be deducted. Tax Tip If you are unsure about your code and are anxious not to end the tax year under or overpaid, then you should have it checked. HMRCmay update an individual’s tax code during the tax year to reflect changes to benefits and to collect tax underpayments. Please talk to us about getting your tax code checked. Benefits The range of benefits available will vary significantly depending on the type of employment. Some attract no tax but even taxable benefits can be efficient as the benefit obtained by the individual can often outweigh the tax cost arising. In addition, for the individual (but not the employer) benefits generally do not attract NICs.
wages and salaries. The tax code
Ensuring the right amount of tax is taken relies on a PAYE code, issued by HMRC and based on information given in a previous self assessment return or supplied by the employer. The employee, not the employer, is responsible for the accuracy of the code. Code numbers try to reflect both an individual’s tax allowances and reliefs and also any tax they may owe on employment benefits and in some cases other types of income. For many employees things are simple. They will have a set salary or wage and only a basic personal allowance. Their code number will be 1257L and the right amount of tax should be paid under PAYE. However, for those who are provided with employment benefits the code number is generally adjusted to collect the tax due so that there are no nasty underpayment surprises. HMRC may also try to collect tax on untaxed income, tax on dividends and tax owing for an earlier year. For Scottish taxpayers a letter ‘S’ is included in the tax code and denotes that the Scottish income tax rates apply to an employee’s pay, rather than the
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Working for Others
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