LI Taxation: Principles and Planning (33179)

Week 3: Taxing Income from Employment and

Pensions
Lecture Illustrations
Question 1: Employment income and benefits in kind
Dalesha Willis is employed by Island Ltd.
During the 2022/23 tax year Dalesha received a gross salary of £50,000 and a bonus of
£14,000, before the deduction of PAYE. PAYE deducted from Dalesha’s salary by Island
Limited during the year amounted to £20,050.
The following information is provided in respect of 2022/23.

 Dalesha received £200 in supermarket vouchers in December to as a contribution

towards her Christmas food shopping.
 Dalesha belongs to a private medical scheme and the company paid the required
premium of £1,350 (including £650 for her family).
 Dalesha took meals in the fully subsidised staff canteen, the cost for the year being
£540.
 Dalesha uses a company car throughout the tax year. The car had a list price was
£20,000 when it was first registered and was purchased by the company on 20th
December 2021 for £18,800. Running expenses including diesel paid by the
company were £2,600 in the year. The car has CO2 emissions of 163g/km and does
not meet the RDE2 standard. Dalesha contributes 20% towards the private fuel.
 Dalesha is provided with a 1.25% loan from her employer of £18,000 which was
granted three years ago to help her buy a house on Barry Island. She has no other
loans and has paid interest only, on a monthly basis.
 Dalesha lives in accommodation provided by Island Ltd. The accommodation has an
annual rateable value of £4,000 and was purchased by Island Ltd for £110,000,
together with furniture costing £5,000, three years ago (when Dalesha moved in).
This accommodation is not job related.
 She pays 3% of her basic salary (excluding bonus) into the company’s registered
occupational pension scheme. Her company contributes 6% of her salary.
Dalesha also received a dividend of £8,600 from BAR plc during the 2022/23 tax year.
Required:
a) Compute Dalesha's employment income and income tax payable for the tax
year 2022/23.
b) Calculate Dalesha's National Insurance Contributions for the 2022/23 tax year
in respect of her employment income.
c) Calculate Island Limited’s Class 1 and Class 1A National Insurance
Contributions in respect of Dalesha for the 2022/23 tax year.
d)
Question 2: Pension contributions (personal pension)

Dune Hayling has been employed as a shoe designer for a several years, earning
£365,000 per annum.
In the tax year 2021/22 she made gross contributions of £120,000 into her personal
pension scheme and her employer contributed a further £130,000.
Dune has no unused annual allowance brought forward.
Required:
Calculate Dune’s income tax liability for the tax year 2022/23.