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HS201 HS202 HS203 IR204 HS205 HS206 IR207 IR208 IR210 HS211 HS212 HS213
Income from employment is fairly easy to determine. In most cases the client will have a P60 or a P45 form, provided by the employer, showing the income and a P11D or a P9D showing details of any benefits-in-kind. It is possible to claim certain expenses against the income but to be able to do this the expense must be wholly, exclusively and necessarily for business purposes. This guide does not attempt to interpret a necessary expense! We assume that all expenses entered are allowable. Most benefits-in-kind are taxable only if the person's income including the benefits exceeds £8,500. As this covers most, if not quite all, employees likely to fill in an SA tax return, we shall assume that all benefits are taxable. (If they are not, they should not be entered.)
A person will either be an employee or a director of a company. Both are taxed in the same way.
In brief the employment income comprises:
Income from P60 or P45.
Tips and Other Income.
Benefits in Kind (includes car-benefit)
Compensation payments or lump sums.
Expenses.
Foreign earnings not taxable and foreign earnings deduction.
Tax is collected at source through the PAYE (pay as you earn) scheme by using a tax code. The value of the tax code is irrelevant to the tax computation. IRIS will compute the tax that should have been paid and deduct the amount actually paid. All the factors that are incorporated into the tax code (things like allowances, car benefits, higher rate adjustments) will be included in the information provided elsewhere on the Tax Return.
The income taxable is simply computed by adding up the items in blue and deducting the items in red. Compensation payments are kept apart from other employment income because they are taxed at the top-slice.
The amount of benefit to include is the cash equivalent. In many cases this is obvious. The following benefits-in-kind require further explanation:
Car benefit and fuel benefit
The term expenses can be confusing here. If the employer pays the taxpayer's expenses that is a benefit to the taxpayer. If the taxpayer pays out of his own pocket that is an expense.
Refer to IR207 for a list of non-taxable benefits-in-kind
One expense requires further explanation: Fixed Profit Car Scheme/Mileage Allowance
