The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
Employment income is defined in the legislation and divided into:
general earnings, and
specific employment income
ITEPA 2003, s 6(1); EIM00610
For the vast majority of purposes, the differences between general earnings and specific income will not affect their treatment for tax, and so will not be addressed here. For further commentary, see the Taxation of cash earnings guidance note (in the Employment Taxes module) and also Simon’s Taxes E4.104.
Broadly, employment income will include anything paid to, or provided for, an employee (or their family) by their employer. For the purposes of PAYE, the word ‘employee’ always includes directors. This includes:
any salary, wages or fee (ie cash remuneration such as salary or bonus)
any gratuity or other profit or incidental benefit of any kind obtained by the employee or director if it is money or money’s worth (ie something of direct monetary value or capable of being converted into money or monetary value such as tips (see below) or cash vouchers), or
anything else that constitutes an emolument of the employment
ITEPA 2003, s 62(2), (3)
Some items that are explicitly defined as employment income include:
termination payments and benefits
payments and benefits in respect of non-approved pension schemes
ITEPA 2003, s 7(4), (6)
Employment income is taxable on the employee to whose employment the income relates. This may not be the person who receives the income or benefit. For example, where benefits are provided by the employer to a member of the employee’s family, income tax and NIC are paid by the employee, not the family member.
Employees and directors are taxable on earnings received in the year. This is usually called the ‘receipts basis’.
The date of receipt of earnings consisting of money is the earlier of when:
payment is made of (or on account of) the earnings
the person becomes entitled to payment of (or on account of) the earnings
ITEPA 2003, s 18
Therefore, if an employee becomes entitled to a payment before
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