Querying taxable benefit

zagfles

MIZZ12 said:

Jeremy535897 said:

zagfles said:

MIZZ12 said:

zagfles said:

Have you actually worked out that you're paying extra tax? What is probably happening is that you get a deduction in the left column of your payslip (this is usually deductions before tax & NI are applied). Then the "benefit" is added back on as a "payrolled benefit" so it actually makes no difference to the amount you are taxed on. It's deducted then added back on.

You might ask why do it this way. It's because it saves you NI, you pay NI on your pay minus the benefit, but you pay tax on your pay (the benefit makes no difference).

You will need to work out your tax and NI to prove this. Post your payslip inc tax code if you don't know how to do this.

Thanks zagfles, I will need to revisit my payslip again but I thought it looks like they have taken the cost of the insurance off my pay, as in reduced my actual earnings plus they have taxed me extra via the taxable benefit although none of the payments are company funded. 

It's probably a "salary sacrifice" type scheme, where they reduce your pay and treat it as a company funded benefit. So eg if your pay was £2000 and the benefit was £100, instead of applying tax/NI on £2000 and then taking the £100 benefit cost off your net pay (ie you paying for it in the normal way), they take £100 off your actual earnings, so you get taxed/NI'ed on £1900, but then they add the £100 back onto your taxable pay as a payrolled benefit so you get taxed on £2000.

So by doing it that way, you get taxed the same but you pay less NI.

If they add it back on as cash, that would negate the salary sacrifice?

Hi Jeremy, they don't add it back to my pay as such, but they have increased the taxable benefit... not sure if that helps explain?

Yes, if they payroll benefits then any taxable benefits are added to taxable pay (not to actual pay) so tax on the benefit is taken along with tax on actual earnings. I think most employers now do it this way rather than the old fashioned way using a P11D and messing with tax codes.

Jeremy535897

Yes, the point is that, unlike pension scheme payments, private medical contributions are not tax deductible, so you get taxed on the net pay plus the benefit.