Surrey International Institute
Dongbei University of Finance and Economics
MAN3102 – Advanced Taxation
Copyright By PowCoder代写 加微信 powcoder
Lecture-5 Week-14b
Academic year 2022 – 2023; First semester
November 27, 2022 1 / 12
Pension Schemes
A Two main types of Pension Schemes:
1 “De�ned bene�ts”
the bene�ts are calculated on the basis of
members’ earnings or length of service
2 “Money purchase”
bene�ts are calculated on the basis of the size
of the members’ pension fund
B Either of the two types may register to HMCR
to qualify for Tax Relief 1
C Types of registered schemes
1 an occupational pension scheme set up by an employer
for the bene�t of employees
2 a public service pension scheme established by government
for public sector employees
3 a personal pension scheme established by an
insurance company, bank etc.
1This implies that unregistered schemes do not qualify for any of the Tax Reliefs
available to registered schemes
November 27, 2022 2 / 12
Registered Schemes: Tax advantages
Scheme’s investment income is exempt from income tax
Capital gains made on the disposal of scheme’s investments
are exempt from Capital Gains Tax
Contributions made by scheme members
attract tax relief (more in a while)
Contributions made by employers attract tax relief
(more in a while)
lump sums paid to scheme members are generally
exempt from income tax, subject to the ‘lifetime allowance’
Note: The Pensions are chargeable to Income Tax
(coming up soon)
November 27, 2022 3 / 12
Giving Tax Relief: Three methods
A Relief at source
A member’s pension contributions are paid net
of basic rate I. Tax (20%)
I.Tax deducted at source is recovered by the Scheme
the member’s basic and higher rate limits are increased
by the gross amount of the contributions
the member’s “adjusted net income” is reduced
by the gross amount of the contributions
B Net pay arrangements
employer deducts an employee’s pensions contribution
from his/her salary, hence an employee gets tax relief at
his/her marginal rate of Income Tax
C Relief on making a claim
IF Tax Relief can not be given under (A) or (B),
THEN is is given by deducting the pension contributions
from Total Income
Note: Tax relief can be claimed for a pension contribution only
in the Tax Year in which the contribution is made.
November 27, 2022 4 / 12
Annual Allowance
The annual allowance for Tax Year 2022-2023 is ¿40,000
The minimum annual allowance is ¿4,000
The annual allowance is reduced by ¿1 for every ¿2 by which an
individual’s ‘adjusted income’ exceeds ¿240,000
for example: ‘adjusted income’ = ¿ 312,000
Annual allowance = ¿40,000 – 50% x (312,000 – 240,000) = ¿ 4,000
The process of reducing the annual allowance for
“high-income individuals” is known as “tapering�
November 27, 2022 5 / 12
Annual Allowance continued
IF pension input amount > annual allowance
THEN the excess amount is charged to income tax at marginal rate
(i.e. the excess amount is treated as an additional slice on top
of the income from all other sources)
IF an individual’s pension input < annual allowance THEN the unused amount of the annual allowance may be carried forward for up to three years (starting with the earliest year, FIFO) for example: for tax year 2022-2023, a taxpayer can bring forward Unused Allowance from 2019-20, 2020-21, and 2021-22, in this order November 27, 2022 6 / 12 National Insurance Contributions (NICs): Classes Class 1 NICs 1 Primary → payable by employees 2 Secondary → payable by their employers 3 both are payable as a % of employee's earnings in a 'contribution period'2 Class 2 NICS 1 �at-rate weekly contributions 2 payable by the self-employed Class 3 NICs 1 �at-rate weekly contributions paid voluntarily to maintain a full contributions record (a gap in the record a�ects the type and amount of bene�ts to which a taxpayer is entitled) Class 4 NICs 1 payable by the self-employed as a percentage of taxable pro�ts 2If an employee is paid weekly or monthly, then each week or month is the 'contribution period' November 27, 2022 7 / 12 Class 1 NICs Class 1 NICs is payable for employees at least 16 years old IF an employee continues to work beyond the state pension age, THEN he/she pays no additional NICs (primary), BUT the employer continues to pay NICs (secondary) Class 1 NICs are calculated on gross salary before deducting pension contributions or any other expenses paid by the employee Class 1 NICs are calculated on a non-cumulative3 basis over the period for which the employee is paid (e.g. week, month) An exception: NICs for company directors are assessed on an annual basis 3'Non-cumulative' means that Class 1 is based only on the earnings of the current contribution period. November 27, 2022 8 / 12 Class 1 NICs: Primary and Scondary Class 1 NICs: Primary employees pay primary NICs at 13.25% on earnings between the lower limit 4 ( ¿ 242 per week or ¿ 1,048 per month) and the upper limit (¿ 967 per week or ¿ 4,189 per month) employees pay primary NICs at 3.25% on any additional earnings above the upper limit Class 1 NICs: Secondary employers pay secondary NICs at 15.05% on all of the employee's earnings above the limit: ¿ 175 per week or ¿ 758 per month employers may deduct an "employment allowance" ≤ ¿ 5,000 per year from their secondary Class 1 NICs liability Class 1A NICs: BIKs - not readily convertible into cash - are exempt from both primary and secondary Class 1 NICs employers pay Class 1A NICs at 15.05% on the taxable bene�ts 4Lower Limit Prior to 6/July/2022 ¿190 per week or ¿823 per month November 27, 2022 9 / 12 NICs: Class 2 and Class 4 Class 2 NICs self-employed persons pay Class 2 NICs at the �at rate of ¿ 3.15 per week, or part-week of self-employment IF Pro�ts for the Tax Year < ¿ 6,725 THEN self-employed persons are not required to pay Class 2 NICs IF ¿ 6,725 < Pro�ts < ¿ 11,908 THEN self-employed persons are not required to pay Class 2 NICs BUT they maintain a full contribution record Class 4 NICs self-employed persons are required to pay Class 4 NICs at 10.25% on ¿ 11,908 < Taxable Pro�ts < ¿ 50,270 self-employed persons are required to pay Class 4 NICs at 3.25% on Taxable Pro�ts > ¿ 50,270
The Class 4 NICs payable for a tax year are collected along with
the income tax liability for that year.
November 27, 2022 10 / 12
Examples and Exercises
Exercise 14.6
Exercise 16.2
November 27, 2022 11 / 12
Thank you very much for attending this lecture
It is time for questions, comments, and suggestions.
(www.menti.com, code: 35 21 20 6 )
November 27, 2022 12 / 12
程序代写 CS代考 加微信: powcoder QQ: 1823890830 Email: powcoder@163.com