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 wages and salaries. The tax code
Company cars Employer-provided cars, commonly known as company cars, remain a popular benefit, 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. For hybrid cars with emissions not exceeding 50g/km, the percentage is determined by the electric mileage. The percentage applicable may be obtained from HMRC here. Example David has a company car, a Hyundai Ioniq, which had a list price of £28,395 when it was provided new on 6 April 2024. The CO 2 emissions are 26g/km and its electric range is 39 miles. David's benefit in kind for 2024/25 is £3,407, being £28,395 x 12%. Fuel for private use A separate charge applies where private fuel is provided by the employer for a company car. The charge is calculated by applying the same percentage figure used to calculate the company car benefit to a fixed figure which for 2024/25 is set at £27,800. No fuel benefit applies to an electric car.
For Welsh taxpayers a letter 'C' is included in the tax code. 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. HMRC may 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 but can be a key part of a remuneration package. Some are completely exempt from income tax. Benefits can also give an NIC saving for the individual. Valuation The general rule is that the value of the benefit is the cost to the company although there are special rules in respect of some benefits. 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.
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 use the code to collect tax on untaxed income, tax on dividends, the High Income Child Benefit Charge 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 rates and bands which apply across the rest of the United Kingdom.
Working For Others
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