June Questions and Answers
Newsletter issue – June 2023
Q. I have just received a bonus payment of £100 from the Nationwide Building Society. Do I need to pay tax on this?
A: This bonus payment from the Nationwide is treated as normal bank interest for tax purposes, so it is taxable. However, in most cases it will be covered by your savings allowance of £1,000 (£500 for higher rate taxpayers). Taxpayers who pay income tax at 45% on savings do not benefit from a savings allowance, so they will have to pay £45 in tax on this bonus.
You will need to include this bonus in your 2023/24 tax return, if you normally complete one.
Q. My company regularly pays expenses on my behalf which I later reimburse the company for, I have a variable outstanding debt with the company during the year. I‘ve read that if the total of that debt exceeds £10,000 at any point the company has to pay NIC at 13.8% on the entire amount. Is that correct?
A: The company has to pay NIC at 13.8% on the value of the deemed interest on the outstanding debt, which is treated as a taxable benefit for you, assuming you don‘t actually pay any interest on that debt.
While the total debt is less than £10,000 for the entire tax year there is no taxable benefit. However, when debt exceeds £10,000 for any part of the tax year the nominal interest needs to be calculated at the official rate (average 2% for 2022/23). This calculation should be based on the average debt across the tax year, or by calculating the precise balance for each day.
If the debt was £9,000 on 6 April 2022 and rose to £12,000 by 5 April 2023, the average debt balance for 2022/23 would be £10,500. The deemed interest for 2022/23 would be: (2% x 10,500) = £210.00. As a 40% taxpayer you would pay tax of £84 on this benefit. The company would pay NIC at 13.8% on £210.00 = £28.98.
Q. An employee has been on maternity leave for several months and as a small company I have reclaimed the statutory maternity pay (SMP), but HMRC hasn‘t repaid this amount in full. Why could this be?
A: The PAYE system is set up to collect tax and other payroll deductions. When an employer is due a refund that sum is first off-set against the PAYE due to be paid over every month or quarter. Rather than pay back the balance of the refund to the employer, HMRC hang on to it to set it against future tax/ NIC liabilities.
If you look in your business tax account under the PAYE section and click on payments made, it should show an unallocated credit, which will be the balance of the SMP owing. You can ask HMRC to pay that sum to you, but that will involve phoning the employer helpline.