Leaver with Benefits: Example

The benefit for Medical (for example) is for a calendar year and each year has its own rate. But the benefit is entered at the start of the tax year, that is, 06 April.

Leaver with benefits example field values

Field	Value
Effective From date of the Medical component	06 April or the start date of the employee, if later
Available From	06 April or the start date of the employee, if later
Available To	05 April
Annual Rate	Enter the amount, for example, £2000
Annual Amount	Select this check box
Processing Rule	Tax across remaining tax periods

The calculation process for April, May and June will assume there are 12 tax periods as employee is still active and will assume 05 April as the default. This results in the benefit value of £166.66 per period (2000/12 using 06 April as benefit start date)

If the employee terminates in July (31 Jul):

• On the existing component enter Available to date as 31 July 2023;

  This will recalculate the benefit for April through July as £641.09 (117 days x 5.4794)

• In the payroll run for July, the remaining benefit amount will be calculated as £641.09 minus the already processed amount of 3 months (£166.66 x 3 = 499.98 resulting in £141.11

The July deduction will adjust any difference in tax (if required) to ensure the correct amount of benefit is taxed upon termination.

Note: End dating the components will stop payroll to process the benefit and therefore the components for benefits will remain active. The Available From and Available To dates should be utilized to ensure correct value is taxed each period. The Available To date should be updated for the new tax year at either 05 April or to the relevant date when the benefit year comes to an end, for example, 31 December for benefits effective for a calendar year. For more information, see Benefits Proration Examples.