Tax advice on BIK and WISA

paulr23

Hi,

I’ve just recently started employment with a new employer, as part of that I get a £500 allowance to spend on a range of things.

I chose a technology benefit basically through salary sacrifice and bought myself a new phone which they subsidise the cost of by £500 however my salary is reduced by £1000 (for example purposes) so I’m in the 40% bracket meaning I only save myself 2% on my NIC. It says that the benefit will be reported on my p11d at the end of the year so I assume I’ll have to pay 40% tax on this? So my real terms discount is only 60% of £500, I believe?

This is where it gets interesting…

I can invest the £500 allowance into a workplace ISA, and therefore I’m not sure whether or not this would be liable to tax or not, it’s says it’s deducted from my salary post tax and NI however if I only use my allowance it’s not really coming from my money. Although I’m not sure whether or not this would be reported on a P11D form and therefore I would have to pay tax on it regardless. 

So my question is… do I have to pay tax if I put it into a workplace ISA as if not it would work out more beneficial for me to do it this way and pay the phone outright.

thanks for any help. 

dunstonh

I can invest the £500 allowance into a workplace ISA, and therefore I’m not sure whether or not this would be liable to tax or not, it’s says it’s deducted from my salary post tax and NI however if I only use my allowance it’s not really coming from my money. Although I’m not sure whether or not this would be reported on a P11D form and therefore I would have to pay tax on it regardless. 

The ISA is tax free but the contribution to it is effectively similar to a direct debit from your bank account in that it comes from your income after tax and deductions.  It is not a P11D benefit.

A workplace ISA is effectively a marketing tool. Some company has managed to persuade the employer to offer the functionality to pay into their products via payroll.   Chances are that the ISA isn't a high quality one (generalisation warning applies).

paulr23

dunstonh said:

I can invest the £500 allowance into a workplace ISA, and therefore I’m not sure whether or not this would be liable to tax or not, it’s says it’s deducted from my salary post tax and NI however if I only use my allowance it’s not really coming from my money. Although I’m not sure whether or not this would be reported on a P11D form and therefore I would have to pay tax on it regardless. 

The ISA is tax free but the contribution to it is effectively similar to a direct debit from your bank account in that it comes from your income after tax and deductions.  It is not a P11D benefit.

A workplace ISA is effectively a marketing tool. Some company has managed to persuade the employer to offer the functionality to pay into their products via payroll.   Chances are that the ISA isn't a high quality one (generalisation warning applies).

Ok so it would technically come from my income however if I were to only allocate my £500 allowance (funded from my employer) it’s effectively a £500 on top of my salary tax free. Of course I can top up any amount over this which is then deducted from my salary 

Yeah, reading reviews of the provider which is cushon, it doesn’t look great and may be more hassle than it’s worth and I’ll just stick with the new phone. 

LeroyBoyce

Hello,

I too have a workplace ISA option from Cushon.

From what I can tell, it takes the deposits after tax and NI, so no benefit there. It also seems to charge a percentage for it, albeit fairly small.

Combined with lousy reviews, it doesn't appear to be competitive.

Albermarle

paulr23 said:

dunstonh said:

I can invest the £500 allowance into a workplace ISA, and therefore I’m not sure whether or not this would be liable to tax or not, it’s says it’s deducted from my salary post tax and NI however if I only use my allowance it’s not really coming from my money. Although I’m not sure whether or not this would be reported on a P11D form and therefore I would have to pay tax on it regardless. 

The ISA is tax free but the contribution to it is effectively similar to a direct debit from your bank account in that it comes from your income after tax and deductions.  It is not a P11D benefit.

A workplace ISA is effectively a marketing tool. Some company has managed to persuade the employer to offer the functionality to pay into their products via payroll.   Chances are that the ISA isn't a high quality one (generalisation warning applies).

Ok so it would technically come from my income however if I were to only allocate my £500 allowance (funded from my employer) it’s effectively a £500 on top of my salary tax free. Of course I can top up any amount over this which is then deducted from my salary 

Yeah, reading reviews of the provider which is cushon, it doesn’t look great and may be more hassle than it’s worth and I’ll just stick with the new phone. 

You would almost certainly be better off contributing more to your pension instead, especially as you are a 40% taxpayer.

Grumpy_chap

paulr23 said:

I chose a technology benefit basically through salary sacrifice and bought myself a new phone which they subsidise the cost of by £500 however my salary is reduced by £1000 (for example purposes) so I’m in the 40% bracket meaning I only save myself 2% on my NIC. It says that the benefit will be reported on my p11d at the end of the year so I assume I’ll have to pay 40% tax on this? So my real terms discount is only 60% of £500, I believe?

How is that a subsidy for the phone if you SS £1k to get £500?

paulr23

Grumpy_chap said:

paulr23 said:

I chose a technology benefit basically through salary sacrifice and bought myself a new phone which they subsidise the cost of by £500 however my salary is reduced by £1000 (for example purposes) so I’m in the 40% bracket meaning I only save myself 2% on my NIC. It says that the benefit will be reported on my p11d at the end of the year so I assume I’ll have to pay 40% tax on this? So my real terms discount is only 60% of £500, I believe?

How is that a subsidy for the phone if you SS £1k to get £500?

Late reply but quite an obvious answer. 

I SS £1k, they effectively increase my salary by £500 as they subsidise the cost of the phone by that amount, so in essence its really only a SS of £500, but its not.