Introduction to Income Tax and NICs Introduction
CONTENTS
Page Introduction .................................................................................... 7
1.1
Objectives ................................................................................................. 7
1.2
The ideal ................................................................................................... 7
1.3
Key dates .................................................................................................. 7 Earnings ......................................................................................... 8
2.1
What counts as ‘earnings’ ....................................................................... 8
2.2
Benefits in kind ........................................................................................ 9
2.2.1
What a benefit in kind is ............................................................................. 9
2.2.2
Tax and NICs liability.................................................................................. 9
2.3
Payment / earnings period..................................................................... 10
2.3.1
Frequency of earnings periods ................................................................. 10
2.3.2
Two or more earnings periods .................................................................. 10
2.3.3
The effect of the earnings period .............................................................. 10
2.4
Determining basic pay ........................................................................... 11
2.4.1
How weekly pay figures are determined ................................................... 11
2.4.2
How salary pay figures are determined .................................................... 12
2.5
Abbreviations ......................................................................................... 12 Deductions ................................................................................... 13
3.1
Employment Rights Act 1996 ................................................................ 13
3.1.1
Lawful deductions .................................................................................... 13
3.1.2
Exceptions ............................................................................................... 13
3.2
Types of deductions............................................................................... 14
3.2.1
Statutory deductions................................................................................. 14
3.2.2
Contractual deductions ............................................................................. 14
3.2.3
Voluntary deductions ................................................................................ 14
3.3
Implications of deductions .................................................................... 15
3.3.1
Sequence ................................................................................................. 15
3.3.2
‘Free of tax’ deductions ............................................................................ 16
3.3.3
‘Free of NICs’ deductions ......................................................................... 16
3.3.4
Pension schemes and contributions ......................................................... 17
3.3.5
Deductions and benefits in kind ................................................................ 18
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