Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether people in receipt of the Test and Trace Support Payment will have a change applied to their PAYE code as a result of that payment having been made.

The Test and Trace Support Payment scheme in England and equivalent support schemes in the Devolved Administrations are linked to employment, and the legislative default is that these payments are liable to income tax. This is in line with the tax treatment of other COVID-19 support payments.

HM Revenue and Customs will use existing powers to gather data from local authorities on the payments made through this scheme. This information will be used to adjust the tax codes through the employer’s PAYE scheme for employees receiving Test and Trace Support Payments.

Such payments are normally liable to National Insurance Contributions (NICs), but the UK Government has granted a NICs exemption in England to reduce the administrative burden on the local authorities making the Test and Trace Support Payments and employers.

The UK Government is working with the Devolved Administrations to extend this NICs exemption to their equivalent schemes.