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Holiday pay


Produced by Tolley in association with
Employment Tax
Guidance

Holiday pay


Produced by Tolley in association with
Employment Tax
Guidance
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Introduction

As with any other cash payments to an employee, holiday pay should be included in payroll, and is subject to tax and Class 1 NIC. The key consideration is the timing of the payment to the employee and the impact that this has on the timing of the deduction of tax and NIC. Guidance on this subject is in HMRC’s CWG2 section 2.7.4.

For employment law implications relating to holiday pay, please see the Holiday pay guidance note. For more on tax on holiday, see Simon’s Taxes E4.1113 and for NIC, see Simon’s Taxes E8.257. HMRC guidance starts at NIM09100.

Normal payment times

If an employer continues to pay the employee at the usual time, then the employer should continue to deduct PAYE and Class 1 NIC in the normal way.

See Example 1.

Payment in advance

If the employer pays a weekly-paid employee in advance of a period of holiday, the PAYE procedures depend on whether the employee is on a cumulative tax code or a Week 1 tax code. See Example 2.

The

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Philip Rutherford
Philip Rutherford

Senior Tax Director at Molson Coors Brewing Company

Phil is the Senior Tax Director for Molson Coors' European operations. He has responsibility for both direct and indirect taxes across both EU and non-EU states. Prior to this, Phil was responsible for Molson Coors UK tax affairs covering all major taxes and duties.   Phil trained at KPMG LLP, where he worked for 8 years, specialising in tax investigations across both direct and indirect tax.

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  • 18 May 2023 11:31

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