PAYE income and deductions

Produced by Tolley in association with

Employment Tax

Guidance

Under PAYE, income from employment is subject to deductions of income tax and NIC in addition to other deductions. Income from employment includes salary, basic pay, overtime, bonus payments, shift payments, regional payments such as London weighting, tips and gratuities plus some expenses, unless they are business expenses. This list is not exhaustive. Also included as income is any incidental benefit of any kind obtained by the employee if it is money or money’s worth, or if the employer has registered for the voluntary payrolling of expenses and benefits. See the How might non-cash income and benefits be taxed? and Voluntary payrolling of benefits in kind guidance notes.

The total of the individual items of pay that make up employment income is normally called ‘gross pay’.

See Example 1.

Benefits in kind (BIK) are usually dealt with under the benefits code and, unless payrolled, are reported at year-end under the P11D procedures. See the Voluntary payrolling of benefits in kind and Year-end benefit reporting guidance notes.

Taxable pay

The value of gross pay as defined

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Ian Holloway

Payroll and Reward Consultant , Employment Tax, Personal Tax

Ian has been in the payroll profession for over 30 years, processing payrolls from all sectors, large and small. He moved from hands-on exposure in 2011 to become involved in educating the profession. His wide-ranging experience and up-to-date knowledge ensures he can impart this information to UK professionals through course material, social media, newsletters and face-to-face presentations.However, educating the profession cannot be achieved without knowing how the profession works on a day-to-day basis and involvement with hands-on administration is essential. So, today, Ian operates as a consultant and advisor and is involved with a vital aspect of the payroll and reward environment, that of working with the software that does a lot of the hard work for the profession.The return to being involved in a hands-on environment has not stopped his desire to inform, educate and train the UK payroll profession. Indeed, this is now better-achieved, as he can draw on real processing situations.Ian approaches education and communication very much from the perspective of how this will impact the software, the employer and the worker. So, whilst the legislation is vital, compliance and effective communication are paramount.Ian is Companion of the Institute for Certified Bookkeepers (ICB), committee member of the British Computer Society (BCS), a committee members of the ICAEW’s Tax Faculty and a Fellow member of the Chartered Institute of Payroll Professionals (CIPP).

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