Tag: PAYE

Is Pension a taxable benefit ?

It’s that time of the year when year-end reporting for PAYE is in focus.

Everybody is confused about the yearend tasks, taxable benefits, PAYE settlement agreements.

Due to auto enrolment many of the employers are now paying pension to their staff.

I was confused about whether employer’s contribution towards pension will be a taxable benefit.

No where I have heard that it is the case but it is always good to double check if a doubt comes to your mind.

I started searching – no answers !!!

Finally I came across HMRC guide CWG2 , it clearly states that Pension contributions are NOT to be included PAYE tax or NIC ; refer Chapter 5

March 2021 – Legislation reference 

Employer’s contribution to employee’s registered pension schemes do not count as earnings or taxable benefits under ITEPA 2003, s 308.

Plus, they do not attract employers’ NICs (SI2001/1004, Sch 3)

PAYE Tax Code change resulting in employer being out of pocket

My client employs a nanny for his children. This used to be nanny’s second job and we were using `BR` tax code to process her salary.

She left her first job, making this her only job. We advised her to call HMRC to get her tax code changed. HMRC sent us a notification with the changed tax code.

On changing her tax code on the payroll software it resulted in a massive refund for the nanny. This refund employer has to pay from his own pocket.

This client has only one employee and after change of tax code future months PAYE bill would also be zero thus no scope of set off with future months PAYE bill.

I called the employer helpline, they were very helpful and they advised me to apply for a funding via link: https://www.gov.uk/payroll-funding

Via this link either employer or agent can apply for funding.

HMRC advised me that if the application was approved, funds would be credited in the nominated account in circa two weeks’ time from date of application.