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Paying tax on ex gratia payments

I've been doing two jobs for the past 12 months and my boss has negotiated an 'ex gratia' payment for me with HR (otherwise known as an 'honoraria' - is there a difference?)
Will I have to pay tax, NI and a pension contribution on this payment which is considered a thankyou gift from the company for my extra work?
And if they do tax me on it...can I appeal?

cc1965 Thurs 07/08/08 15:32

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Ethel
Thurs 07/08/08
15:51

It is income - you pay tax and all the rest of it.

The taxman isn't bothered whether it's ex gratia or honoraria - this is only a way of employees performing jobs outside of their normal contract.

factor30
Thurs 07/08/08
19:16

Yes, as Ethel says it is taxable. It will also be subject to NI. As to whether it's pensionable will depend on your employer.

buildersmate
Fri 08/08/08
09:03

As above. Howevere there is a limit on employee's NI contributions per month (or week) provided you are not a Director, so you will probably gain in the sense that once the max. amount is reached, your deduction for NI on that payment will be capped.
If your company runs a Final Salary Scheme pension scheme, there is no advantage to you in this payment being pensionable - it won't change the salary on which your pension is based, so query this if it happens. On a Money Purchase pension scheme, the pension contribution just rolls extra funds into your own pension pot.
No you can't appeal it - it's just income.

factor30
Fri 08/08/08
19:23

Although the NI figure falls I thought NI was now payable above the old cap, albeit only at 1%. Any saving in NI rate reduction will be outweighed by the move to 40% tax at a similar salary level

buildersmate
Sat 09/08/08
17:53

You're probably right Factor (about the 1%). I didn't check the latest stuff on it.

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