One off payment tax!

[Cupofteaonesugar]

Hi all,
Just a quick question because I'm really unsure.
I normally earn £890 per month. I don't get taxed as I don't earn enough.
My employer is giving us a one off COLP which I'm choosing to take in the form of vouchers. They've told me because I'm opting to do this I will.get taxed next year so I need to put the money for the tax aside. I don't know how to work out how much to put aside? My payment will be £1000!

Sorry what do you mean by that?
I used 45p as it says that every pound it'll be reduced by 55p so it'll be 45p x the pound or am I wrong?

It looks like you multiplied by .45 and removed that figure from your uc award though you need to reduce it by .55. Apologies if I’ve got that wrong.

@womaninatightspot no I think you're right as the person below has mentioned 55p too but I can't place where you mean! I've copied my calculation below...

879 (my wage) + £166 (monthly benifit) = £1045 wage
1045 - 573 (my UC allowance before deductions) = 472
472 x 0.45 = £212.4
869 (my allowance of up) - 212 = 657.

So I think you need to multiply 472 *.55 =259.60 then take that away from UC award.

869-259.60 = 609.40 + 1045 = 1654.4 Overall if you get vouchers

879-573= 306x.55 =168.3
869-168.3 =700.7 +879 =1579.7 what you get currently

The difference is 74.7 which is 166 *.45

Tax on it next year on the full £1000 would be £190 as the rate in April changes to 19%. Based on your income you would not pay any tax as it wouldn't bring you to the £12570 threshold.
It may be disappointing to you that you will lose some UC but remember some of your colleagues will be losing some in tax . And it's that tax that pays your UC and you should be happy your less reliant on benefits. If everyone tried not to lose benefits or pay tax there would be nothing in the pot to give you .

@womaninatightspot ahhh thank you! Yes I get it no and you're definitely right.

@whowhatwerewhy I'm more then great full for my UC payment every month, you don't need to tell me to be greatful. From the age of 17, throughout working almost full time hours at uni, to the age of 29 when my husband walked out on my when I was pregnant I have paid tax. I'm in a situation now where I have to claim. Some people may abuse the system but I don't so don't brand everyone with the same bush and tell me I should be greatful because yax payers pay for the payments. I know this. It doesn't make me any inferior to them. I'm trying to make a responsible decision here as to what is going to benifit me the most.

Hi op
You did say you were under the impression you didn't have to declare a volunteer. This includes you are trying to avoid losing your UC , maybe I can be paid in volunteers too and avoid tax and NI .

I'm not trying to cheat the system. My employer suggested this to people on UC to ensure that they could still get the one off payment like those not on UC.
Also I never said that the voucher wouldn't effect tax or NI. I was trying to calculate the correct amount so I could put it away for when I would be charged.
Like I've said many times I'm weighing up my options so that I can make a responsible decision. Just like those who aren't in receipt of the benifit I am struggling too.

Your best not having a lump sum as this will attract NI that you can't claim back . You are better having it spread to avoid NI . Unless you have a bonus you will still be under the tax threshold, you would pay £200 on 1000 this year and £190 if it's next years tax .
Personally I would spread it out over 6 months as if you declare an extra £1000 income in one go to UC it will have a big impact, spread out you know where you stand for 6 months with no shock at the end .

Vouchers exchangeable for goods and services only (non-cash vouchers)
You must:
• report the value on form P11DD_
• add the cost of the vouchers to the employee’s earnings when deducting Class 1 National Insurance (but not PAYE tax) through payroll

OP I think we work for the same employer lol I too receive UC but I work full time so still pay TAX and NI. I think by the looks of it it won't be worth my while getting it which is unfortunate. I feel quite down about it actually as it would have been such a help coming up to Christmas

I wouldn’t take it in a lump sum or take it over 6 months if that would mean you didn’t get universal credit.

I was stung by getting a whole years pay in read in April which meant I didn’t get UC and wasn’t much better off- to then also not get the cost of living payment so I actually ended up worse off! We still currently don’t know the autumn qualifying period.

Ahhhh no way 🙊🏠
It's very disheartening isn't it. Everyone at work was buzzing hearing about it last week and I'm just instantly thinking how difficult this may be for me to manage and budget.
HR mistakenly paid my wage three times in one pay a few months ago which had a massive detrimental effect to my UC and pay for a good two months and I'm still wounded from that ordeal!
I'm obviously beyond grateful for the benefit, I don't know what I'd do without it. But times like this, or bonus or OT are just defeating because the payment is there for a purpose but there's no personal benefit.
Starting to learn you get absolutely no sympathy or understanding from those not claiming though 😬

Thanks all. I'm going to opt to spread it as I think I'll see around £70-100 extra each month if I've worked it all out correctly.
Really appreciate the helpful replies, my mind gets so confused when it comes to tax and all that!

I know it won't seem like much in comparison but assuming your marginal tax rate is 33.3% you would get to keep £300.10 after taper had been applied which isn't great but it's better than nothing.

You will see some of it though and all of us get taxed on bonuses etc so always loose some of it
UC is to help top up wages do if you get any extra income the less UC has to make up.
But UC claimaints also got help that others just over didn't so its just swings and roundabouts really
Disappointing though i got a bonus when on tax credits and then had an overpayment which I had to pay back several years ago and it was a but if a kick
Its a shame we can't all have like £500 tax free/ not considered uc bonus once a year

Would that be if I take it as a lump sum? I feel like my head is about to explode with it all 🙈

Ha ha yes I absolutely think we do work for the same employer. I haven't gotten round to bonus month yet as only been getting UC a few months. Not looking forward to this either now 😭 I have actually sent a note on the journal on UC online to ask them what it would look like

I am also very grateful for UC this is not me bashing as it has helped me massively. I guess when it comes to bonuses it isn't really a bonus if you are not seeing any real benefit

I may be wrong but this is my take:

Vouchers that can be exchanged for goods or services are classed as a benefit in kind.

As such your employer will report this to HMRC via your P11D at the and of the tax year.

Tax is due on a BIK if it takes you over the personal allowance.

HMRC normally adjust tax codes to recoup this in the next tax year.

It appears your pay will still be below the personal allowance so you won't have any additional tax to pay and no adjustments will be made.

Caveat:
This assumes you receive no other benefits in kind during the tax year (these could be things like private medical, car etc ...basically anything that is not cash)

I assume the comment on pay tax next year was generic to everyone that decides on vouchers rather than to your specific salary.

I may however be wrong

It's a bit random but could you ask them to pay it into your pension to avoid tax/ni

Or ask for extra holiday instead? So you still get a benefit but not cash.

Yeah as a lump sum spread it out and you will get the same amount just in smaller chunks.

If it gets paid into pension it won't affect UC.

I'd count this under the £1000 trading allowance as it's not your main job