The list of ways pay can be treated for tax: fully taxable, exempt, exempt up to a limit, an add back, or a reduction taken before the tax bands.
When to use it
When setting the system up, and when the law changes how a kind of pay is treated.
Before you start
Agree the treatment and the statutory basis for each heading with whoever advises you on tax.
Where to find it
Open the HR area from the main menu, then HR Setup, then Tax Heading.
The fields on this screen
| Field (on screen) | What to enter | Required |
|---|---|---|
| Heading Code | The short code the tax working matches this heading by. TDS_EMPLOYMENT is fixed - do not rename it. | No |
| Heading Name | Plain name for this heading, shown on lists. The tax working matches on the Code, not on this name. | No |
| Treatment Kind | Decides how pay under this heading is taxed: fully taxable, exempt, an add-back or a pre-slab cut. | No |
| Statutory Basis | The law this treatment comes from, kept for your records. Nothing is worked out from what you type. | No |
| Section | The section of the law being relied on. It is carried onto the tax working as a reference only. | No |
| Tenant Overridable | (not explained yet) | No |
| Order | (not explained yet) | No |
| Params (jsonb) | Settings the chosen Treatment Kind needs, such as an exempt cap or an add-back percent. | No |
| Notes | (not explained yet) | No |
How it works
Each salary component is tied to one heading. The heading tells the tax working what to do with the money on that line. The treatment kind decides the handling, and any settings that kind needs (an exempt limit, an add-back percent) go in the treatment settings beside it.
The heading is matched by its code, never by its name. Renaming a heading is safe, but changing its code is not: a component tied to the old code stops being recognised. Above all, do not change the code for payroll tax withheld.
The statutory basis and section are carried through as references. Nothing is worked out from what you type in them.
A component with no heading is not income
Pay on a line whose component has no heading is not counted as income at all. Instead of leaving it out quietly, payroll refuses to run for the whole organization once any Compensation Policy is in use. The refusal names the components that are missing a heading.
The link from a component to its heading is not set on the Salary Component screen and cannot be set from there. If you meet that refusal, note the names it gives and ask whoever set up your system to complete them.
Tips and common mistakes
- Do not delete a heading that components are tied to. Removing it takes their pay out of the tax working.
- Add a heading before you add the component that needs it.
- The name is for people and the code is for the system. Keep the code short, fixed and meaningful.
Related guides
- Tax Policy Year: the bands, caps and rebates that headings feed into
- Salary Component: the lines that carry a heading
- Tax Employee Config: the employee's own circumstances