PART 2: TAX
Final salary benefits are valued at 20 × the annual pension in payment or a deferred pension benefit for an employee yet to take their benefits. Funds above the limit can be subject to a charge of up to 55% if drawn as a cash lump sum and 25% if taken as a pension (in addition to the Income Tax paid on the pension). Employees had the option to preserve the tax treatment on funds that exceed the lifetime allowance limit at the time the limits changed by applying for fixed protection if their fund already exceeds £1m but is equal to or less than £1.25m, or individual protection if their fund is predicted to exceed £1m in future years. HMRC provides guidance on fixed protection at https://www. gov.uk/tax-on-your-private-pension/lifetime-allowance . COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS On 3rd March 2021 the Chancellor announced that the lifetime allowance will be frozen until 2026. BANK CHARGES Amounts paid or credited to an employee to meet normal bank charges are subject to PAYE and Class 1 NICs at the time payment is made. However, reimbursement of bank charges arising solely as a result of failure by the employer (for example, crediting bank accounts after the contractually due date of wages or salary) have no liability to tax or NICs either Class 1 or 1A. Such charges are deemed to be compensation resulting from a breach of contract. Where an Employment Tribunal makes an award for an illegal deduction from wages they can also award compensation for bank charges that arose as a result of the failure to make payment as due, or due to an unlawful deduction from pay. BENEFICIAL LOANS An employee with a loan outstanding from an employer during the year will be chargeable to tax on the difference between the interest paid and the official rate of interest as prescribed by the Treasury by Statutory Instrument only if that loan, or total loans, exceed £10,000 (£5,000 till April 2014) at any point in the tax year.
Date from % No printing, copying or reproduction permitted. 6.75 06/04/2008 6.25 06/04/2016 7.25 01/03/2009 4.75 06/04/2017 6.25 06/04/2010 4.00 06/04/2018 5.00 06/04/2014 3.25 06/04/2019 6.25 06/04/2015 3.00 06/04/2020
Actual official interest rate charge on beneficial loans from 6th November 1996
Date from %
Date from %
06/11/1996
3.00
06/08/1997
2.50
06/03/1999
2.50
06/01/2002
2.50
06/04/2007
2.25*
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