PSA1170 - Overview of PAYE Settlement Agreements: Example Calculation

The PSA calculator on SEES will calculate the tax and Class 1B NICs due under a PSA. There are separate calculators for each tax year. You just enter the type of the benefit or expense paid in the first column and the value of the amounts applicable to basic rate, higher rate, or the additional rate and the calculator does the rest.

The following example shows how to calculate the tax and Class 1B NICs payable under a PSA for 2014-15:

An employer provides benefits valued at £50 to 1200 of their employees which would ordinarily attract a Class 1A NICs liability. 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, and
  • 200 employees pay tax at the additional rate

Tax Calculation

Value of benefits provided to basic rate employees (800 x £50) = £40000.00

Tax due @ 20% on total value of benefits of £40000 = £8000.00

Grossed up tax £8000 x 100/(100-20) = £10000.00

Value of benefits provided to higher rate employees (200 x £50) = £10000.00

Tax due @ 40% on total value of benefits of £10000 = £4000.00

Grossed up tax £4000 x 100/(100–40) = £6666.67

Value of benefits provided to additional rate employees (200 x £50) = £10000.00

Tax due @ 45% on total value of benefits of £10000 = £4500.00

Grossed up tax £4500 x 100/(100–45) = £8181.82

Tax Payable (Taken from grossed up tax amounts) = £10000.00 + £6666.67 + £8181.82 = £24848.49

Class 1B NICs Calculation

Value of items attracting Class 1A NICs £50 x 1200 employees = £60000.00

Add grossed up tax payable £24848.49. Total liable to Class 1B NICs = £84848.49

Class 1B NICs payable £84848.49 @ 13.8% = £11709.09

Total payable in the PSA; Tax £24848.49+ Class 1B NICs £11709.09 = £ 36557.58

200 employees pay tax at the additional rate.