The term "notional payment" applies to payments made to employees that are not in the form of cash but must be treated as cash for the purposes of PAYE and NICs.
A notional payment allows you to calculate and deduct tax and NI due on a payment, without increasing the amount paid to the employee.
How it works
✅ Adds to taxable gross and NI-able gross - the value is included when Income Tax and NI are calculated.
✅ Excluded from net pay - no cash value is added to what the employee is actually paid.
✅ Shown on the payslip as an addition and deduction - so employees can see why their tax position has changed.
✅ Included in the RTI FPS submission - grossed-up figures are reported to HMRC correctly.
Setting up a Notional Payment in Finity
Go to the Pay Components screen.
Create a new pay component and set the type to Notional.
Assign the value as either Recurring (via the Recurring Payments tool) or One-off.
Run payroll as normal - the notional value is factored into tax/NI automatically.
You can assign more than one notional element to the same employee in the same pay period.
Reporting
Notional payments will show on payroll and pay component reports in Finity, so you'll have full visibility of the notional values processed for each employee alongside your other pay data.
Notes
Not available for Umbrella or Subcontractor worker/processor types
Doesn't include full P11D reporting, P11D(b) submission, or Employer Class 1A NI -these remain separate.