8 Tax Free Benefits All Companies Can Use
We often get asked by clients about what whether there are tax free benefits that they can be getting from their company: Benefits they can receive without paying tax on them.
Here is our list of the top 8 benefits that you can provide to employees and directors of your company.
Normally, when you provide a benefit to your staff (or to you if you a director of the company), both the staff and the company are taxed on that benefit. There are some benefits where you don’t pay tax. In fact, better than that, the costs are tax deductible in the company.
1. Pensions
Payments into a self-invested personal pension plan (SIPP) up to £40k are exempt. You should seek advice from a suitably qualified and regulated financial advisor.
2. Trivial Benefits Exemption
You can get up to £300 for trivial benefits from the company, up to £50 in each instance, each year.
3. Mobile phone
The company can provide you with a mobile phone tax free. There are, however, some critical conditions – one of which is that the contract must be in the company name. If the contract is still in your name then it is simply treated as extra salary, which is expensive from a tax perspective.
4. Christmas or annual party
You can spend up to £150 (including VAT) per person for a Christmas party as a tax exempt benefit. Note that is “up to” – a single penny more and the whole lot becomes a benefit in kind and taxable on both you and the company. Typically you would not be able to recover any VAT suffered on the costs.
5. Counselling
It’s great to know that counselling is a tax-exempt benefit. So if you are having a hard time, and need to see someone about your mental health, your company can foot the bill.
This also includes couples counselling but does not include medical, financial, legal or recreational counselling (so you can’t call your personally trainer your fitness counsellor!)
6. Home working allowance
If you work from home you can claim up to £6 per week as a contribution towards additional costs that you may incur without paying any income tax. This is called the Home Working Allowance.
Also, any equipment that is provided to the employee that is wholly, necessarily and exclusively for the purpose of that work is also exempt
7. Relevant life cover
This is a special sort of life insurance that the company takes out on behalf of its employees, with the employee’s family or financial dependents receiving the benefits on the death of the employee. This is a really complex and highly regulated financial service and we strongly recommend that you seek advice from a suitably qualified financial advisor before taking any action. I just wanted to make you aware that there are some sorts of life insurance products that the company can take out on your behalf. Whilst a touch grim, it may be potentially relevant in the current circumstances. Here is a useful article from Unbiased.
Conclusion
So that’s our top recommendation for tax free benefits. These are benefits that all companies should consider to help save tax. We would be more than happy to discuss this further with you if you have any questions.
