PSA1170 - Overview of PAYE Settlement Agreements

Example Calculation

An example of how to calculate the tax payable under a PSA is shown here:

An employer makes benefits payments of £50 to 1000 of their employees. A PSA is agreed on the basis that the payments are minor.

The employer states that

  • 800 employees pay tax at the basic rate
  • 200 employees pay tax at the higher rate

the benefit attracts Class 1A NICs.

The tax and Class 1B NICs payable under a PSA would be as follows:

Tax Payable
Benefits valued at £50 provided to 800 basic rate employees, total value= £40000.00

Tax due @ 22% on total value of benefits of £400000

= £ 8800.00

Grossed up tax £8800 x 100/(100-22)

= £11282.05
 
Benefits valued at £50 provided to 200 higher rate employees, total value= £10000.00

Tax due @ 40% on total value of benefits of £10000

= £ 4000.00

Grossed up tax £4000 x 100/(100–40)

= £ 6666.67
 
Tax Payable £11282.05 + £6666.67= £ 17948.72
 
Class 1B NICs Payable 
Value of items attracting Class 1A NICs £50 x 1000 employees= £ 50000.00

Add grossed up tax payable £17948.72. Total liable to Class 1B NICs

= £ 67948.72
 
Class 1B NICs payable £67948.72 @ 12.8%= £ 8697.43
 
Total payable in the PSA; Tax £17948.72 + Class 1B NICs £8697.43= £ 26646.15