Pay / Tax Question ....

10
Found 16th May
Hi Everyone ....

I’ve a little question for the people in the know.

The firm I work for have offered the below:
• A monthly contribution upto £500 upto 2 years OR
• A one off large payment c£14k.

My Q:
• Is there a financial tax benefit to go for one over the other?!

Thanks,
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Depends whether you are on the cusp of paying tax at higher rate. If £14K will take you into the 40% bracket but £6K won't then the monthly option would be better, although you appear to be losing out by £2K on the monthly deal. Is this in lieu of a company car? However, you would likely be better getting advice from an accountant with all the facts rather than a random guy on HUKD ;-)
If it was me, I would be wondering

£14k now is + 16.6666%. Normally, you would expect that to be a minus since you would be getting the growth. The amount would be discounted by roughly this amount. Why the generosity? It sounds attractive so it has to be too good to be true.

Are the circumstances of the payment exactly the same for either option? (read the small print PLEASE). Most specifically, is the £14k payment in 2 years time or now?
Will you stay 2 years?
Will they keep you for 2 years?
Will they be afloat for 2 years?
Are you self employed or PAYE?
Is it into your SIPP/PPP or a scheme they control?
Are either / both pre tax rebate?
Is it recoverable in defined circumstances?
You say upto 2 years. What governs the 'upto'
You say c. £14k. What is the calculation?
Is it in this tax year (6th April18 to 5th April 19) if you take the lump sum?
Do you have qualifying earnings that HMRC will allow you/them to make the contribution(s) against?

And then I would be talking to my IFA
Edited by: "ccnp" 16th May
ccnp21 m ago

If it was me, I would be wondering £14k now is + 16.6666%. Normally, you …If it was me, I would be wondering £14k now is + 16.6666%. Normally, you would expect that to be a minus since you would be getting the growth. The amount would be discounted by roughly this amount. Why the generosity? It sounds attractive so it has to be too good to be true.Are the circumstances of the payment exactly the same for either option? (read the small print PLEASE). Most specifically, is the £14k payment in 2 years time or now?Will you stay 2 years?Will they keep you for 2 years?Will they be afloat for 2 years?Are you self employed or PAYE?Is it into your SIPP/PPP or a scheme they control? Are either / both pre tax rebate?Is it recoverable in defined circumstances?You say upto 2 years. What governs the 'upto'You say c. £14k. What is the calculation?Is it in this tax year (6th April18 to 5th April 19) if you take the lump sum? Do you have qualifying earnings that HMRC will allow you/them to make the contribution(s) against?And then I would be talking to my IFA


Thanks for the advice, and so promptly.

It’s for a relocation. I would get the lump sum prior to relocation. If I decide to leave within the two years then either option of money paid will have to be repaid.

As I live in Scotland the lump sum payment takes me over the 40% higher tax band.
I'd just work out your net pay over two years on both scenarios and I'd probably take the highest, or if they were reasonably close, there would be no great issue with taking the £14k and puting it in an ISA or whatever wrapper takes your fancy.
Oops. I (wrongly) assumed this was pension related. Apologies.

And Scotland. I have little knowledge of the rules up there which I believe are now partly under the control of the SP.

I would now be asking to confirm it was eligible for the benefit in kind allowance (gov.uk/exp…mpt).

And I would need some advice but not from an IFA. Sounds like they want to keep you so ask to have access to their payroll people/accountants for a chat. They often know most of the tricks. Or have they done this for someone else you know?
There is one small print item to bear in mind; Make sure it's not repayable if you LEAVE. Only if you RESIGN. You will doubtless appreciate the difference in today's world.
You could try and ask them to Pay your Tax Liability or some of it on the given amounts as its an Out of Pocket Expense that they are asking you to do..

Also theres a thing called Qualifying Expenses, which can include Relocation Allowance, around 8K which the Employer can claim as Tax and NI exempt which you may wish to look into if that helps you in anyway.
If you earn over roughly £3500 a month. You will pay 2% NI and 40% Tax. Many things will vary that but I’m generalising.

If you can afford not to take it in a lump sum, make it work for you. Assuming you pay into a pension. Do you have the option to pay more into it while work still matches? If so bump your pension up a % or 2. That way the £500 covers the additional payment and they pay extra on it. So say you pay 1% extra, assuming they do too. You pay £50, so do they. You get £500 extra plus £50 extra pension on top that you wouldn’t normally get.
Also you will get a tax benefit in pension contributions further helping.
TheAppleGeezer2 h, 1 m ago

Thanks for the advice, and so promptly.It’s for a relocation. I would get t …Thanks for the advice, and so promptly.It’s for a relocation. I would get the lump sum prior to relocation. If I decide to leave within the two years then either option of money paid will have to be repaid.As I live in Scotland the lump sum payment takes me over the 40% higher tax band.


If you take it as a monthly payment it may be pensionable or subject to raised NI contributions.
cmdr_elito54 m ago

If you take it as a monthly payment it may be pensionable or subject to …If you take it as a monthly payment it may be pensionable or subject to raised NI contributions.



Its a while ago since I had one of these packages but in those days, the company had to be very honest with HMRC about separating relocation costs (non NI etc) and excess expenses (NI able etc).
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