Rolling forward with my series on UK taxation (don’t worry, it’s almost over if you’re going comatose), I just wanted to address tax implications for company benefits and other extras.
If you receive tips or bonuses from your employer—or even non-monetary benefits, such as a company car—you may have to pay UK taxes and National Insurance on them.
– tips: You must pay tax on cash tips paid to you directly from a customer, but not national insurance. If the tip from the customer was paid on a credit or debit card, if your employer is responsible for allocating tips among staff, they’re responsible for paying income tax and NI. If the employer is not responsible for this, tax must be paid, but NI contributions are not due.
– bonuses: For UK tax purposes, bonuses are considered part of your compensation from your employer, so you pay income tax and NI on them accordingly.
– benefits: If your employer gives you a company car, you will pay taxes on its value (determined based on list price, emission, and type of fuel it uses), which might be valued lower if you pay (even in part) for its use or don’t have full-year access to it. Living accommodation may be taxable, unless it is required for you to do your job or do it better (see this link for more guidance on this and these other scenarios). Loans from your employer in excess of £5,000 will be taxed if they’re offered interest-free or otherwise less than the official rate—you will then pay tax on the difference between what you actually pay and would officially pay. Finally, medical benefits also apply—the taxable amount is the value of the benefit, typically the cost of insurance premiums.
This is not an exhaustive list of benefits, obviously, so for complete guidance, please refer to the HMRC page on Expenses and Benefits. And again, Americans, bear in mind that it is US taxes that you’re ultimately responsible for, so you should be refunded any excess you pay in UK income tax (while also bearing in mind that you’ll still be taxed on some benefits per US tax law).
So there you have it, folks, in a nutshell. Tomorrow I’ll give a little shout-out to VAT, and from there we can bid a fond “Cheerio!” to UK taxes for a while.