Income Tax & NIC Chapter 5&6 Flashcards
Employment income & Pensions (18 cards)
tax advantages of being self-employed
national insurance: no employers class 1 NIC to be paid and lower rates apply for class 4
PAYE: income tax and NIC do not have to be collected under PAYE and are paid under self-assessment instead
expenses: less strict rules around deductibility of expenses
employment income proforma
add:
salary
bonus
benefits
reimbursed expenses
cash vouchers
less:
expenses wholly for business
contributions to employers pension scheme
subscriptions to professional bodies
charitable donations
travel expenses
use of own car mileage allowances
= employment income
what form should be used for reimbursements?
P11D included in the tax return
Approved mileage allowance payment rates
first 10,000 miles is 45p, all miles above 10,000 at 25p
two main rules applied to all taxable benefits
taxable benefit reduced by any contributions made by employee and time apportioned if only available for part of a tax year
exempt benefits that do not attract a tax charge
- trivial benefits less than 50 pounds
- employers contribution to pension schemes
- subsidised restaurant or canteen if available for all employees
- provision of parking space
- provision of one mobile phone
- benefits aimed at promoting carpooling
- parties up to 150 per head
- workplace nurseries
- relocation and removal expenses up to 8000
- overnight expenses (5 for UK, 10 for overseas)
- homeworkers additional costs up to 6 pound per week
- loan with beneficial interest rate provided its less than 10,000 per year
- provision of job related accommodation
- up to 500 for medical expenses
what is the basic charge of living accommodation
higher of:
- annual value of the property, and
- rent paid by the employer if any
additional charge for expensive accommodation
(cost of accommodation - 75,000) * 2.25%
consequence of base cost on accommodation when employer has purchased the accommodation more than 6 years before renting to employee
if purchased more than 6 years ago, market value of accommodation should be used instead of original cost of accommodation
what qualifies for JRA
- where it is necessary for the proper performance of the employees duties
- where it will enable better performance of employee duties
- where there is a special threat for employee security
beneficial loan tax benefit
interest that would have been payable - interest actually paid
asset usage value
value * 20%
pension schemes are exempt from which taxes
tax free as they are exempt from income and CG tax
which taxpayers can only set up a PPC
self-employed and unemployed individuals. they cannot join OPS
conditions for tax relief for pension contributions
pension scheme is registered and individual is under the age of 75
maximum annual amount for tax relief in accordance to pension schemes
tax relief lower of:
- total pension contributions paid
or the higher of
- 3600, or
- 100% of individuals relevant earnings
how is tax relief given for HRTP and ARTP
basic rate band is extended by gross amount of pension contribution
annual allowance reduction formula
(adjusted income - 260,000) * 50%
minimum allowance can be is 10,000
