Tax Deduction for per diem salary in UK

pradhanr

Hi,
I am working for an IT company having its client in UK and have been on deputation in UK from 1st July 2008 till date.
I recieve a base salary and a per diem salary both of which are paid at the end of the month.I was told that the Per Diem component would help me save on Tax cuts.
Till the month of November, the per diem component of my salary was not taxed and PAYE tax was deducted only from the Base Salary.
Now my Company informs me that I have to provide all the bills and reciepts of expenses incurred by me or else tax will be deducted from the Per Diem component as well. I would like some informationon the following points:
i. Is Per Diem salary taxable by the financial laws in UK? If Yes where can I find more details regarding salary paid as per diem.
ii. What is the percentage that will be deducted as tax from the per diem component.
iii. Is NI deducted from Per diem component even if it is deducted from the Base component.

Will be great ful to you if I could recive answeres to the above query...

Andy_L

Assuming it's a per diem for travel & subsistence costs then if the amount is "reasonable" for T&S and the duration of payment is less than 2 years than they are income tax & NI free.

Reasonable is based on either receipted actuals or your employer having a chat with HMRC and agreeing a flat rate, generally only worth it for lage companies with a lot of staff travelling about. Any payment in excess of that is a benefit in kind and subject to tax & NI as as if it were salary, ie 20 or 40% tax and 10 or 1% NI

It sounds to me like your employer were trying to pull as fast one to evade tax & have been caught out/realised it won't work.

HMRC's website is the place to look
http://www.hmrc.gov.uk/paye/stepbystep-travel.htm