PAYE Question

aj9648

I have started employing someone and he had a question regarding his tax. Is there anyway to reduce his tax bill for e.g. bonuses - are bonus payments taxable? Is there anyway to reduce tax and NIC payments?

dejongj

Yes they are taxable....Only way around it (that I know off) is making that person self-employed, or a shareholder and pay in dividends which should be at a lower taxation.....

WHA

NIC is calculated on a "per payment" basis, so you can actually save a bit of nic by having fewer, but larger, bonuses, say 4 per year instead of 12 per year, as anything over the NIC threshold won't get the full NIC rate taken from it. All this assumes that bonuses would take the pay for the period over the NIC limit of £670 per week.

Tax is cumulative, so the same idea won't work for tax unfortunately, but neither would it make the total tax more.

How about "waiving" some of the bonus as salary sacrifice and getting the company to provide more pension contributions instead, or perhaps a "tax efficient" benefit in kind, such as a low co2 emission "company car" for yourself or partner - that way you get a lot more for your money as the employer saves employers NIC so can put that saving into the "benefit" or pension as well.

aj9648

Is profit related pay tax free???

And can you pay PRP if you have not made a profit?