The Tax Compass Podcast

Employment Income UK Tax: PAYE, Tax Codes, Pensions, Benefits and Why Payroll Often Gets It Wrong

If you are employed and you assume that because your company runs payroll your employment income tax is being handled correctly, this episode is for you. In Episode 21 of the Tax Compass Podcast, Simon and Laura cover the full landscape of employment income and UK tax. This is an area where people most commonly discover either that they have been overpaying tax for years or that they have an unexpected liability they never saw coming. Both situations are avoidable with the right knowledge. Simon opens with the observation that even clients with complicated tax returns often have a comfort blanket of knowing LSR Partners will sort things out. The concern is the clients who think their employment income is simple and therefore does not need checking. It is often those clients who are sitting on the biggest surprises. The episode covers the following areas in detail: How PAYE and tax codes work. HMRC issues a tax code to your employer and your employer applies it mechanically. Payroll has no discretion. If the code is wrong, payroll applies the wrong code regardless. The error sits with HMRC and it falls to you to spot it and correct it. Laura explains how cumulative and emergency codes work differently, and why an emergency code can mean missing out on unused allowances and brackets that you are entitled to. Benefits in kind and the difference between those processed through payroll in real time and those reported via P11D at the year end. P11Ds are being abolished in April 2026 and everything will need to be payrolled, but until then the timing gap between receiving a benefit and having it reflected in your tax code creates a period where you have taxable income that has not been taxed. The episode explains how this works and what to watch for. Pension contributions, covering the distinction between salary sacrifice and relief at source, why the naming of these two schemes is confusing and arguably the wrong way round, and why higher and additional rate taxpayers using relief at source schemes need to claim their additional relief through a tax return rather than assuming the pension provider handles it. The annual allowance and tapering. The current annual allowance is £60,000, tapering down to £10,000 for those with adjusted income above £360,000. Over-contributions create a tax charge that people consistently fail to anticipate, and the episode explains why the first year of exceeding the allowance often catches people with no carry-forward relief available. The upcoming salary sacrifice cap. From a future date, salary sacrifice pension contributions will be capped at £2,000 per year. Simon and Laura are clear that this is a stealth tax rise. Employer National Insurance savings on salary sacrifice contributions above that level will disappear, which will almost certainly lead to employers reducing or removing the matching contributions that currently make salary sacrifice schemes so valuable. The message is straightforward: maximise employer contributions now while the current rules still apply. Equity awards and the £100,000 threshold. For clients whose salary sits just below £100,000, a bonus or equity vesting event can push their total income above the threshold, remove their personal allowance and create a tax liability that neither they nor their employer anticipated. The episode walks through exactly why this happens and why it is more common than people expect. Simple assessment and overpaid tax. HMRC is estimated to have caused around 600,000 people to overpay tax through incorrect PAYE processing. The simple assessment system is designed to catch these errors, but in practice LSR Partners see it failing regularly, including cases where overpayment relief claims are simply being ignored. The episode closes with a reminder that equity is covered in more detail in a separate episode, and with the consistent LSR Partners message: if you have questions about your employment income tax position, get in touch before a problem compounds rather than after. lsrpartners.com [https://lsrpartners.com/] Subscribe for more tax guidance for expats and globally mobile individuals. Brought to you by LSR Partners – helping you pay the right tax in the right place at the right time. 📲 Book a call with us to talk about your situation: https://lsrpartners.com [https://lsrpartners.com/] 🎧 Catch up on all past episodes: https://lsrpartners.com/podcast-videos

The Statutory Residence Test: A Plain English Guide to UK Tax Residency for Leavers and Arrivers

If you are leaving the UK, arriving in the UK, or already living overseas, your UK tax residency status is the single most important factor in determining what you owe HMRC and where. In this episode, Simon and Laura tackle the Statutory Residence Test head on. Not the 125-page HMRC manual version, but a clear, honest, high-level guide to how it works, why it matters, and what you need to be thinking about before you make any international move. The Statutory Residence Test was introduced in April 2013 to replace a system that was far less clear-cut. Its purpose is straightforward: to determine whether you are UK tax resident in any given tax year. If you are resident, you are taxable in the UK on your worldwide income and gains. If you are not, you are taxable only on UK sources of income. The difference between those two positions can be enormous. Simon and Laura cover the full picture in this episode, including: * Why HMRC makes it easier to arrive in the UK than to leave it, and how that imbalance shows up throughout the test. * The automatic overseas tests, including the day count thresholds (15 midnights for leavers, 45 for arrivers) and the full-time work overseas test, which applies to most people relocating for employment but contains more detail than most people expect. * The three automatic UK tests, covering the 183 day rule, the only home in the UK test, and the full-time work in the UK test. The last two are designed specifically to catch people who leave or arrive part way through a tax year and are far more commonly relevant than the 183 day rule most people default to. * The sufficient ties test, which determines residency for anyone who does not fall into one of the automatic categories. Five potential ties, including family, accommodation, work, the 90 day tie and the country tie, interact with your day count to produce a residency outcome that surprises many people. The commonly cited 182 day rule is only the starting point, not the whole picture. * Split year treatment, which allows the tax year to be split into a resident period and a non-resident period for people who leave or arrive part way through the year. There are more routes into split year treatment on arrival than on departure, which again reflects HMRC's general direction of travel on residency. * The interaction between the Statutory Residence Test and double tax treaty residence, and why being UK tax resident does not prevent you from being simultaneously tax resident in another country. * Why real-time records of your days, work activity and location are essential, and why having a documented piece of advice from LSR Partners in your files makes a material difference if HMRC ever opens an enquiry. The episode closes with the message that runs through everything LSR Partners does: if you are leaving the UK or arriving in the UK, have the conversation before you go. Not after. One client spent three days too many in the UK and faced a £20,000 tax bill that proper planning would have avoided entirely. Every situation is different. The Statutory Residence Test is detailed, fact-specific and unforgiving when applied incorrectly. Get in touch before you act. lsrpartners.com [https://lsrpartners.com/] Subscribe for more tax guidance for expats and globally mobile individuals. Brought to you by LSR Partners – helping you pay the right tax in the right place at the right time. 📲 Book a call with us to talk about your situation: https://lsrpartners.com [https://lsrpartners.com/] 🎧 Catch up on all past episodes: https://lsrpartners.com/podcast-videos

Employment Related Equity — RSUs, Options and What Happens When You Move Countries

If your employer pays you in shares as well as salary, this episode is for you. Simon and Laura tackle one of the most consistently misunderstood areas of UK tax: employment related equity. Whether you have RSUs, share options, or some other form of equity award, the UK tax treatment is not always obvious, and the consequences of getting it wrong can be significant. They start with the basics: what RSUs are, why HMRC treats them as employment income rather than capital gains at the point of vesting, and what your base cost looks like once you have received the shares. From there they move on to share options, explaining why the tax point works differently, you are taxed when you exercise, not when the options vest, and what that means in practice for people sitting on unvested or unexercised awards. The episode then gets into the area where LSR do a substantial amount of client work: what happens to your equity awards when you move countries during the vesting period. If you are relocating to the UK with existing RSU grants, or leaving the UK with unvested shares, time apportionment is the key concept. HMRC will look across the entire vesting period and tax the UK-resident portion accordingly. The problem, as Simon and Laura explain, is that company payrolls frequently get this wrong, sometimes in your favour, sometimes not. There is also a memorable story about a former Lehman Brothers employee who never sold a share, kept his entire retirement fund in company stock, and was completely wiped out in 2008. Not financial advice, but a useful reminder about concentration risk. Topics covered in this episode: 1. How RSUs are taxed as employment income in the UK and what that means for your payslip 2. The difference between RSUs and share options, and why the tax point is different for each 3. What your base cost is once shares vest and how capital gains tax applies when you sell 4. Time apportionment: how HMRC calculates the UK-taxable portion of awards that span periods of residence and non-residence 5. Why company payroll often apportions incorrectly and how to spot if you are overpaying or underpaying 6. Concentration risk and why diversifying equity awards is worth thinking about If you have questions about your equity awards and how they interact with your UK tax position, book a call with us. lsrpartners.com [https://lsrpartners.com/] Subscribe for more tax guidance for expats and globally mobile individuals. Brought to you by LSR Partners – helping you pay the right tax in the right place at the right time. 📲 Book a call with us to talk about your situation: https://lsrpartners.com [https://lsrpartners.com/] 🎧 Catch up on all past episodes: https://lsrpartners.com/podcast-videos

UK Pensions Explained: Annual Allowance, Tapering & Salary Sacrifice Changes

Pensions are powerful, but they are increasingly complex. In this episode of the Tax Compass Podcast, Simon Roue and Laura Sant break down: 1. The £60,000 annual allowance 2. What counts towards it 3. The tapered annual allowance for high earners 4. Annual allowance charges 5. Carry forward 6. Salary sacrifice vs relief at source 7. The National Insurance angle 8. Proposed changes that could affect employer contributions If you earn over £100,000, and especially over £200,000, this episode is essential listening. We explain how to avoid common pension mistakes and why employer contributions may change in the near future. lsrpartners.com [https://lsrpartners.com/] Subscribe for more tax guidance for expats and globally mobile individuals. Brought to you by LSR Partners – helping you pay the right tax in the right place at the right time. 📲 Book a call with us to talk about your situation: https://lsrpartners.com [https://lsrpartners.com/] 🎧 Catch up on all past episodes: https://lsrpartners.com/podcast-videos

Temporary Non-Residence Explained: UK Tax Risks for People Leaving the UK

Leaving the UK doesn’t always mean leaving UK tax behind. In this episode of the Tax Compass Podcast, Simon Roue and Laura Sant break down the UK’s Temporary Non-Residence rules; a complex but critical area for anyone moving abroad. If you’ve been UK tax resident for 4 of the last 7 years, leaving the UK for fewer than 5 full tax years can trigger anti-avoidance rules that bring overseas income and gains back into UK tax when you return. We explore how this applies in practice, why it exists, and how recent Budget changes make careful planning more important than ever. This episode is essential for: 1. Entrepreneurs and business owners 2. Individuals with pensions or investment portfolios 3. Anyone considering relocating abroad, even temporarily You’ll walk away with clarity, confidence, and a better understanding of how to protect yourself from unexpected UK tax bills. lsrpartners.com [https://lsrpartners.com/] Subscribe for more tax guidance for expats and globally mobile individuals. Brought to you by LSR Partners – helping you pay the right tax in the right place at the right time. 📲 Book a call with us to talk about your situation: https://lsrpartners.com [https://lsrpartners.com/] 🎧 Catch up on all past episodes: https://lsrpartners.com/podcast-videos