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To adjust the amount of tax you pay each month, HMRC will reduce your personal allowance. This Concession allows HMRC to give up income tax and capital gains tax in instances where it has failed to make proper or timely use of your financial information. Financial Services Limited.

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In this article. What is PAYE? How is PAYE calculated? This will show how much tax is due to be refunded, or is owed for previous years. You started receiving a pension at work. I haven't paid enough tax. I've paid too much tax. You should receive this payment by the September after the end of the tax year. Why have deductions reduced my personal allowance? What if deductions exceed my personal allowance?

Could my PAYE tax be written off? Tax will usually only be written off in the following circumstances: you were notified of arrears more than a year after the end of the tax year in which HMRC received the relevant information you were notified of an overpayment after the end of the tax year following the year in which a tax refund was made by HMRC, and you reasonably believed you paid the right amount of tax in exceptional circumstances where HMRC has failed more than once to make proper and timely use of information, and arrears build up over two whole tax years.

In this case, tax arrears may be given up even if the taxpayer is notified before the end of 12 months following the end of the relevant tax year.

Use Inland Revenue's calculators to check. Failing to contact Inland Revenue if you realise you've made a mistake — errors can usually be corrected pretty easily. Rating form How helpful was this information? Additional comments.

Related content More More. Test yourself on the difference between fringe benefits tax and employee allowances. Get started. Read on. Keeping people healthy and safe.

See how with our visual guide. How to pay employees for leave. The normal PAYE system applies to all employees of a UK employer even if the employees are working abroad for all or part of the time. When you send an employee to work abroad you should provide the employee with a letter giving the following details, the:. If the employee goes abroad to work full time and you move them to a payroll with a different employer reference you should submit an FPS with a date of leaving.

You should then send an FPS with starter information from the new reference. If an employee is intending to work in full-time employment abroad for more than a complete tax year you should ask them to complete a P This applies whether the employee files a Self Assessment tax return or not. The P85 should be sent to HMRC no earlier than 8 weeks before the date the overseas work is due to commence and be accompanied by a letter requesting the NT tax code. If the employee ceases to be subject to tax and National Insurance contributions, they can be removed from your FPS until they return to the UK and deductions recommence.

You should not operate an NT tax code before receiving formal notice from us as this may result in you sending an incorrect FPS and may incur penalties. The letter confirming that you can use code NT will explain that any PAYE tax that the employee paid prior to leaving the UK cannot be repaid until after the end of the tax year.

As an alternative, for the year of leaving the UK, you can run 2 separate payroll records for the employee each one operating cumulatively , one on the UK pay the employee was paid up to departure and the other for the earnings for work done abroad after departure.

This will allow you to repay some of the UK tax that the employee paid prior to departure in each pay period until the end of the tax year. If you do decide to do this you should let us know and separate payroll IDs will be necessary for each record.

You can also operate a similar procedure for the tax year the employee returns to work in the UK but you must always tell us that the employee has returned to work in the UK and you should immediately stop using code NT. Find out if the foreign tax authority requires you to make deductions and as soon as you have confirmed this you should contact us. You must operate PAYE for employees working offshore, but there are exceptions. Before employees start working in these areas, write to us for further information.

Read the help and guidance section for our address. If the residency position of the employee or the place the duties are performed change so that the employee becomes liable to UK tax, you should immediately stop using code NT and follow the procedure for employees coming to the UK from abroad. From April legislation was introduced that affects the application of the travel expenses and subsistence rules for workers who provide their services through an employment intermediary and who are subject to the supervision, direction or control of any party.

Therefore when a worker regularly commutes from home to a workplace for each assignment they will not be eligible for relief on travel and subsistence. Each workplace is classed as a permanent workplace and so the travel is ordinary commuting.

For more information, read Expenses and benefits for directors and employees - a tax guide: Where a worker is supplied through their own company for example, a Personal Service Company PSC or partnership, it is not necessary to consider the test of supervision, direction, or control.

This is how employment status for tax is decided for the vast majority of people, who do not work through their own company. If a mistake is made with this flag, and the flag needs to be ticked or unticked, this should be done in a corrective FPS submission made for the same or subsequent pay period. From April , large and medium-sized organisations will become responsible for assessing the employment status of the contractors they engage to work for them. The existing rules which outline the boundary between employment and self-employment for tax or National Insurance contributions purposes, continue to be used to determine whether an office or employment would have existed but for the use of an intermediary.

Where the worker would have been an employee or an office holder of the client, but for the presence of the service company or partnership, the service company or partnership may pay the worker a salary which is liable to PAYE and National Insurance contributions. If the salary actually paid is less than the income received by the service company or partnership, from relevant engagements with a client less certain deductions then the balance will be deemed to have been paid to the worker as a deemed employment payment on the last day of the tax year.

From 6 April , large and medium-sized organisations will become responsible for assessing the employment status of the contractors they engage to work for them.

From April where services are provided to a small non-public sector client, the intermediary will continue to be responsible for determining status and operating PAYE and paying National Insurance contributions under Chapter 8, Part 2, ITEPA if the rules apply as follows. In computing the deemed employment payment, the following deductions shall be allowed against income from relevant engagements:.

A deemed employment calculator is available. The amount of Class 1 National Insurance contributions payable in respect of that aggregate amount should be calculated using an annual earnings period, irrespective of whether the worker is a director of the company in the tax year.

Where the provisions of the Intermediaries Regulations apply to the worker from the beginning of the tax year, the worker will have an annual earnings period. Where a later start date applies the worker is prescribed a pro rata annual earnings period.

Read, CA National Insurance for company directors. Separate legislation applies to income received from 6 April by workers providing their services through a Managed Service Company MSC. An MSC is a form of intermediary company through which workers provide their services to end clients. In essence a scheme provider promotes the use of these companies and provides the structure to workers.

The worker although a shareholder does not exercise control over the company. Where a worker provides their services through a managed service company, the existing rules which outline the boundary between employment and self-employment for tax and National Insurance contributions purposes do not apply.

Payments or benefits received by the worker or an associate which are not already treated as earnings, and can reasonably be taken to be in respect of the services of the worker, are treated as employment income and earnings.

For the purposes of the legislation, a company means a limited company, a limited liability partnership or a general partnership. On each occasion when the worker or their associate receives a payment or benefit from the managed service company which is not earnings from an employment, the managed service company must calculate the deemed employment payment in accordance with the legislation and operate PAYE and Class 1 National Insurance contributions on the deemed employment payment.

Appropriate deductions will be allowed on account of the deemed employment payment when calculating profits chargeable to Corporation Tax or partnership profits. For guidance on calculating the deemed employment payment, read Employment Status Manual. When calculating the deemed employment payment, a deduction can be made for specific allowable expenses.

For example, travel, subsistence or accommodation costs, are not allowable expenses. But where regular payments have been made to the director or employee in question throughout the tax year, the deemed payment should be treated as a week 53 payment. Read section 1. For National Insurance contributions purposes, the deemed employment payment should be aggregated with any other earnings paid to the worker by the MSC.

For more information about the legislation, read off-payroll working through an intermediary IR The calculation of the deemed employment payment should be reported on an FPS on or before 5 April If the intermediary is not able to calculate the actual amount of the deemed employment payment and the PAYE and National Insurance contributions due for to by 5 April , a payment on account of the estimated tax and National Insurance contributions due should be made by 19 April supported by a provisional calculation of the deemed payment reported on the final FPS submitted on or before 5 April Where a provisional payment of tax and National Insurance contributions has been made because it was not possible to accurately calculate the deemed payment and deductions on time, any adjustments should be reported through an earlier year update submitted to HMRC after the end of the tax year between 20 April and on or before the following 31 January Where HMRC does not receive the earlier year update and balancing payment by the following 31 January , the last FPS submitted will be considered to be the final and correct details.

Interest will be charged on late payments made after 19 April when the payment was due , but no penalties will be charged for sending the final earlier year update figures late if:. For more information, read understanding off-payroll working IR Where a UK agency is involved in the supply of workers overseas and the worker is liable for Class 1 National Insurance contributions whilst working abroad, then the UK agency is responsible for operating PAYE and National Insurance contributions.

A worker who would otherwise be self-employed is subject to Class 1 National Insurance contributions and PAYE when they work through an agency and:. Section 1 Class 1 National Insurance contributions if it can be shown the worker is not subject to or to the right of supervision, direction or control by anyone as to the manner in which they provide their services to the end client.

Where the oil field licensee is responsible as the secondary contributor, a certificate system has been introduced. This will allow oil field licensees to continue dealing with foreign employers and agencies within the industry without exposing themselves to liabilities for tax and National Insurance contributions.

Employment intermediaries must send HMRC a return every 3 months containing details of all workers they place with clients where they do not operate PAYE on the payments. For more information, read what this means for an intermediary or phone the Employment Intermediaries Compliance Unit on Telephone: It lists the main type of payments that can be made to employees.

Some entries will refer you to more detailed information elsewhere. This is because there may be special conditions for that type of payment. You can register now to use the online service to tax expenses and benefits through your payroll. If you do this you no longer need to complete a form P11D for most taxable benefits excluding accommodation or loans. For more information, read payrolling employees taxable benefits and expenses.

For details of what to include on form P11D read the list at paragraph 5. If car or van fuel has been supplied for private motoring using your credit card, garage account or an agency card. For people new to a childcare voucher scheme from 6 April and conditions are met the amount available depends on the tax position of the individual. For people new to a childcare vouchers scheme from 6 April and conditions are not met the amount available depends on the tax position of the individual.

Where the employee is provided with accommodation which is within one of the categories where the value does not have to be included for tax purposes on form P11D. On the condition that prior authority given by you to make the purchase has been given, the employee explained in advance of the contract being made and the supplier accepts that the purchase is made on your behalf.

Payments made by a third party or by you on behalf of a third party such as payments for jury service. Vouchers provided for food and drink provided on your business premises for any canteen where meals are generally provided for your staff, and vouchers redeemable for meals only all values.

Contract to supply goods and services is between the employee and the provider, and payment made direct to the provider. Employee is the subscriber but employer meets the cost of calls or rental. The phone used exclusively for business use.

You can also read expenses and benefits: A to Z. For expenses and benefits which are being payrolled, the tax should be reported through RTI rather than on form P11D. Employers who payroll car and car fuel benefits do not have to send a P46 car where the car has been made available after they have registered for payroll, instead the car details will be reported through real time information. Complete a form P46 car or online equivalent to give details of all employees and directors for whom form P11D is appropriate, who are provided with a car which is available for private use.

The completed form P46 car must be sent within 28 days of the end of the quarter to 5 July, 5 October, 5 January or 5 April in which any of the following takes place:. Full guidance and information on the tax and National Insurance contributions aspects of company cars can be found in Expenses and benefits for directors and employees - a tax guide: and Class 1A National Insurance contributions on benefits in kind CWG5. Complete a form P11D to give details of all taxable expenses payments and the cash equivalent of any taxable benefits provided for employees, directors of a company or business or their families, dependants and guests.

Form P11Ds also include helpful fields which indicate that you need to calculate the amount of Class 1A National Insurance contributions that may be due on specific taxable benefits you provide to your employees. Guidance on what to enter on form P11D is given at paragraph 5. P11Ds are not required for employees whose employer has registered for payroll benefits, read payrolling employees taxable benefits and expenses.

Class 1A National Insurance contributions still needs to be calculated on the taxable amount of the benefit which was payrolled. The return date for both form P11D and form P11D b is 6 July following the end of the year in which the benefits and expenses have been provided.

Form P11D b can also be used to make adjustments to the total benefits liable to Class 1A National Insurance contributions taken from forms P11D and calculated from payrolled taxable amounts. Employers who payroll benefits and expenses are still required to complete form P11D b in respect of the Class 1A due on the benefits provided and make payment by the due date 19 July.

In working out the cash equivalents of non-cash benefits for future years, so as to determine whether a report is needed or not, you only need make reasonable estimates using the rules in force in the year in which termination occurs.

You do not need to wait until 6 July if you want to send the report earlier. You can send it at any time after the termination has occurred. You can prepare your report in whichever way suits you best. A copy should always be given to the employee. This has to be made by 6 July following the end of the tax year in which the variation takes place. The report should only contain details of the variation. In these circumstances, you should send a report to the address shown , at the latest by 6 July following the end of the tax year in which the change takes place.

The report, however, should be for the year in which termination occurred as if one had been required in the first place. This list gives general guidance only. It does not cover all expenses or benefits. Expenses and benefits for directors and employees — a tax guide: , gives more information as does the P11D Guide.

Expenses and benefits can also attract a Class 1 or Class 1A National Insurance contributions liability. The list at paragraph 5. Employers who payroll benefits and expenses do not have to complete a form P11D. The exception to this, is where the expenses or benefits are provided under salary sacrifice or other forms of optional remuneration arrangement. Further guidance is in paragraph 36 of CWG5 and in Appendix 12 of booklet Expenses and benefits for directors and employees — a tax guide: From 6 April paid or reimbursed expenses, and benefits provided, for which tax relief is available in full are exempted from tax, subject to certain conditions, and do not need to be reported to HMRC on form P11D.

All dispensations ceased to have effect on 5 April Expenses payments or reimbursements for which tax relief is not available on the full amount will need to be paid subject to PAYE. Benefits provided for which tax relief is not available on the full amount will need to be reported on form P11D. For the exemption to apply you must have a checking system in place to make sure that employees are in fact incurring and paying amounts in respect of the expenses and that a deduction is due in respect of the full amount paid or reimbursed.

The exemption will not apply to expenses paid or reimbursed under a salary sacrifice arrangement. Payments made under a salary sacrifice arrangement should be made under PAYE. Employees can make a claim for tax relief direct to HMRC where any expense is incurred and not paid or reimbursed by you, where the exemption does not apply because the expense is not fully deductible, or where expenses or benefits are provided under a salary sacrifice arrangement.

Your application will need to set out the:. Your checking system must be able to show that payments are only made on qualifying occasions where employees meet the relevant conditions for payment, that the amount paid is a reasonable estimate of the expenses being incurred, and that employees are in fact incurring and paying amounts in respect of the expense. A PSA is an agreement between you and your HMRC office under which you agree to pay the tax in a lump sum on certain expenses payments and benefits in kind you give to your employees.

In addition to making lump sum payments of tax, you also make lump sum payments of National Insurance contributions on items included in PAYE settlement agreements by paying Class 1B contributions. PAYE settlement agreements normally apply to items which are:.

To find out more, read PAYE settlement agreements. If you pay more than the statutory National Insurance contributions free amount, the excess amount must be added to any other earnings the employee receives in the earnings period in which you make the motoring expense payment. To work out whether National Insurance contributions are due, you must multiply the amount of business miles travelled by the statutory mileage rate and compare that figure to the amount that you have paid.

For privately owned cars and vans, the rate to use is the one which applies to the first 10, business miles. This rate is shown in the table and must be used irrespective of the number of business miles actually travelled. In working out whether National Insurance contributions are due, you must include in the calculation of the National Insurance contributions free amount all business miles travelled, even if you do not pay the employee for all of his business mileage.

For employees who use their own motorcycles and cycles for business travel, or who carry passengers, use the appropriate rates in the table. The rules for paying the new passenger rate and what counts as business travel are the same for both tax and National Insurance contributions.

More guidance on these rules for National Insurance contributions, including examples of how National Insurance contributions are calculated on motoring expenses payments, can be found within Tax and National Insurance contributions for employee travel: This is calculated as follows:.

If you do not pay more than the approved amount, all payments are tax-free approved mileage allowance payments. You do not need to include them on form P11D.

If you pay more than the approved amount, the excess will be charged to tax and you should include it on form P11D only where you have been unable to tax this under PAYE. Excess mileage payments can no longer be included in PSAs. This is explained in Tax and National Insurance contributions for employee travel: Where an employee gets motoring expenses payments from 2 or more associated employments, aggregate the mileage to work out when 10, business miles is reached.

These are payments you make to employees travelling on business journeys specifically because they carry as passengers fellow employees for whom the journeys are also business travel. It can also apply where the vehicle used is a company car or van, provided the employee is chargeable to tax on car or van benefit. Exempt passenger payments do not need to be included on form P11D but any excess should be taxed through the payroll but you should keep adequate records to demonstrate that payments made satisfy the conditions for exemption.

If you pay an employee expenses for using a privately owned vehicle for business purposes, there are special rules for working out whether you need to include these payments in gross pay, read paragraph 5. The type of evidence will depend on the item of business expenditure.

For example, evidence could include:. Payments based on a scale rate, which covers the costs likely to be incurred, should not be included in gross pay. For scale rate payments to be excluded from gross pay the scheme you operate must satisfy all the following conditions, the:.

Details of the scheme and its provisions must be available for inspection. National Insurance contributions will be charged on all payments made under the scheme if the scheme is not supported by written evidence or is not considered sound. Do not include in gross pay any payments made in respect of reasonable additional household expenses incurred by employees in carrying out duties of their employment at home. If you choose to pay more, you must retain supporting evidence to show that the payment is wholly in respect of additional household expenses incurred by the employee in carrying out the duties at home.

If you cannot identify the business expense include the whole allowance — whether or not an expense is actually incurred — in gross pay. If the expense is wholly deductible for tax purposes it may be covered by the expenses exemption. Payments which are exempted from tax are also not liable for National Insurance contributions.

Where a round sum allowance is clearly meant to do no more than reimburse an employee for an expense actually incurred in doing their job, and the expense was incurred only because of the job the expense may be covered by the exemption for paid or reimbursed expenses.

If so, the expense payment does not need to be reported. The rules on the tax and National Insurance contributions treatment of business travel by employees are explained in Tax and National Insurance contributions for employee travel: Chapter 6 of Tax and National Insurance contributions for employee travel: guide explains the limited circumstances in which you need to account for National Insurance contributions on travel and subsistence payments.

Payments you make to or for an employee who has to move residence as a result of being relocated in the UK by you, should be treated as follows. What constitutes an exempt expense payment is found in appendix 7 of expenses and benefits — a tax guide. Include in gross pay any expenses that are not exempt. Amongst other things this will include any payments not listed as eligible is found in expenses and benefits — a tax guide. Do not include in gross pay any expenses payments that are eligible for tax relief as listed in expenses and benefits — a tax guide.

Include in gross pay any relocation expenses you pay that are not eligible for tax relief. If you provide:. Do not include in gross pay any exempt allowances and expenses paid to employees relocating abroad.

Treat payments of expenses to employees working abroad like other expenses payments. In addition, include in gross pay:. If you pay an employee a general allowance to compensate for the higher cost of living abroad, commonly known as a cost of living allowance or cost of living addition, that sum must be included in gross pay. The guidance tells you what you should do if you make additional one-off payments such as on redundancy or retirement.

The treatment of a payment made when an employee stops working for you varies according to the type of payment. A single payment is often made up of more than one element.

For example, one payment might cover:. Each element must be considered separately. First decide the appropriate tax and National Insurance contributions rules to apply to each element. Then add these separate results together. The list under paragraph 5. If you need more information about how to value non-cash benefits, read Expenses and benefits for directors and employees - a tax guide: Contact us for guidance on calculating the taxable amount if:. This prevents the employee carrying out the duties of the employment.

Due under statutory redundancy payment rules and paid from your non-statutory scheme to compensate for loss of employment by reason of redundancy. Redundancy has a special legal meaning. Broadly, there must be a reduced need for employees which causes the termination of the employment. This would not include, for example, a payment in lieu of notice provided for by such a scheme. The redundancy may be paid indirect.

For example, an employee leaves as a result of a reduced need for employees elsewhere in the business. For example, you agree, or the courts or an employment tribunal rules, that the employee was unfairly or wrongly dismissed — if you pay something which is due under the terms or conditions of employment, it will not be damages, for example, you may be ordered, or agree as part of a settlement of damages, to pay wages due under such terms — in these circumstances that element of the payment must be included in gross pay for National Insurance contributions and PAYE purposes.

The course must be:. There are further conditions relating to the time when the employee starts the course, and the period for which the employee has worked for you. Where payment is made from rights which accrued before 6 April in respect of service outside the UK, in certain circumstances all or part of the lump sum will not be chargeable to tax. Read the guidance in the Employment Income Manual for more information on when this will apply.

If you are an employee, you normally pay tax through PAYE. PAYE ensures that the yearly amounts you have to pay are collected evenly on each pay day over the course of the tax year. You may be entitled to tax credits and to tax reliefs and exemptions to reduce the amount of tax you pay. If you are a PAYE customer, please see how to review your tax for any of the four previous tax years. Published: 11 May Please rate how useful this page was to you Print this page.

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