Make the most of tax free benefits
There are few areas in tax where the taxman actually allows you a tax free benefit. There are a number of specific exemptions where, if your employer pays for something on your behalf, it can be provided free of tax and National Insurance.
Typically, the best way of taking advantage of this is to enter into a Salary Sacrifice arrangement with your employer. These generally involve your employer agreeing to pay for something on your behalf and you agreeing to give up a part of your salary equivalent to the cost.
Example of the types of benefit that may be provided free of tax are as follows:-
• A mobile phone for personal and business use (restricted to one per employee)
• Contributions to registered pension schemes
• Nursery provision of up to £55 per week per parent
• Interest free loans provided the total does not exceed £5,000 (to be increased to £10,000 from 6 April 2014)
• Free car parking at or near the place of work
• Health checks and eye tests
• Business mileage reimbursed at HM Revenue & Customs approved rates
• Permanent health insurance
An employee might save either 20% or 40% Income Tax as well as up to 12% National Insurance.
The employer can also benefit as there is generally also a saving of employers National Insurance, currently at a rate of 13.8%. In addition to the above, there are a number of schemes approved by HM Revenue & Customs that allow employees to acquire shares in the company that they work for. These schemes typically have exemptions which allow shares to be received either free of tax up to certain limits or with very favourable tax treatments that make them highly attractive.
To obtain tax and National Insurance favourable treatment on benefits, it is essential that their provision is structured correctly and expert advice should always be taken.
Should you require more information please do not hesitate to contact Stuart Hinnigan at the office.
Author: Stuart Hinnigan FCA CTA
Stuart’s career in accountancy began when he joined Preston based Moore and Smalley in 1994 following his graduation from Lancaster University. He qualified as a Chartered Accountant in 1997 and then chose to specialise in...
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