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Relocation Allowance and Tax (gross-up)
Lamplighter
Posts: 46 Forumite
in Cutting tax
Hi there
I've changed jobs during the current tax year, and have benefitted from a relocation allowance as I have moved 250+ miles.
The Company has paid the full allowance of £8,000 to me, and have grossed it up in my earnings by paying an additional £5,552.74. I have a few questions, which it would be great if I could find some answers here.
- Assuming I'm a 40% tax payer, with 2% marginal employee's NI, the net benefit of £13,552.74 would be 58% = £7,862. The full £8k net would be achieved by a gross payment of £13,793, whereas it would appear I'm actually £138 light. Am I missing something in my calculation, which my employer tells me they've got right?
- In fact my projected full annual earnings are in the 100-125k bracket, so this gross-up payment has actually impacted on my tax code, and contributes to reduce the £12,500 personal allowance by £6,776 (£2:£1). It would seem therefore I will pay 40% extra tax on this amount, being £2,711. Should I expect my employer to remedy this, and if so then how as any additional payment will also reduce the personal allowance yet further.
- As I look at the regulations on relocation allowances, there is no requirement for the employer to declare tax and NI on qualifying expenses to £8,000, nor to supply any supporting records. I had always assumed to be a net payment - this is the first employer with whom I've experienced the allowance to paid via salary. Why therefore does this issue arise at all?
- Am I able to explain to HMRC about the gross-up and the impact on my tax code, and are they able to redefine that income as something other than earnings from employment, so that it doesn't impact my PAYE? Would I get this opportunity on my SA tax return?
I'm rather confused as to what I can do about this, but I'm not loving my tax code as a result! Any advice on any of the above Qs would be greatly appreciated.
Thanks
I've changed jobs during the current tax year, and have benefitted from a relocation allowance as I have moved 250+ miles.
The Company has paid the full allowance of £8,000 to me, and have grossed it up in my earnings by paying an additional £5,552.74. I have a few questions, which it would be great if I could find some answers here.
- Assuming I'm a 40% tax payer, with 2% marginal employee's NI, the net benefit of £13,552.74 would be 58% = £7,862. The full £8k net would be achieved by a gross payment of £13,793, whereas it would appear I'm actually £138 light. Am I missing something in my calculation, which my employer tells me they've got right?
- In fact my projected full annual earnings are in the 100-125k bracket, so this gross-up payment has actually impacted on my tax code, and contributes to reduce the £12,500 personal allowance by £6,776 (£2:£1). It would seem therefore I will pay 40% extra tax on this amount, being £2,711. Should I expect my employer to remedy this, and if so then how as any additional payment will also reduce the personal allowance yet further.
- As I look at the regulations on relocation allowances, there is no requirement for the employer to declare tax and NI on qualifying expenses to £8,000, nor to supply any supporting records. I had always assumed to be a net payment - this is the first employer with whom I've experienced the allowance to paid via salary. Why therefore does this issue arise at all?
- Am I able to explain to HMRC about the gross-up and the impact on my tax code, and are they able to redefine that income as something other than earnings from employment, so that it doesn't impact my PAYE? Would I get this opportunity on my SA tax return?
I'm rather confused as to what I can do about this, but I'm not loving my tax code as a result! Any advice on any of the above Qs would be greatly appreciated.
Thanks
0
Comments
-
I think you need to ask your employer why the relocation amount of £8,000 has been taxed in the first place, with reference to
https://www.gov.uk/expenses-and-benefits-relocation/whats-exempt
1
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