Introduction

Tax efficiency and tax planning are crucial for all businesses, whether private or non-profit. Additionally, one key area offering significant opportunities is benefit planning. Specifically, benefit planning allows you to remunerate your staff, including yourself as a business owner, in the most tax-efficient way.

The Importance of Benefits in Kind

Why Benefits in Kind Are Useful

Firstly, benefits in kind provide a tax-efficient way to reward employees. Whether you run a private company, a charity, or a social enterprise, offering benefits can lead to tax savings.

Tax Efficiency for Employers and Employees

Consider this scenario: an employee wants to go to the gym monthly. Consequently, the employee would have to pay from their post-tax income. However, if the employer covers this cost, it can be more tax-efficient for both parties. Employers can also avoid paying extra National Insurance contributions on top of gross wages.

Examples of Tax-Free Benefits

Pensions

Pension contributions made by your company are a tax-efficient way to save for the future. Moreover, these contributions are deductible against corporation tax profits, benefiting both the employee and the company.

Mobile Phones and Technology

Employers can provide mobile phones, laptops, and smartphones. These items, provided through company contracts, are tax-free benefits and valuable tools for employees.

Workplace Parking and Health Benefits

Offering free parking is another tax-efficient benefit. Additionally, employers can provide health screening and medical checkups, promoting employee well-being.

Trivial Benefits

Trivial benefits, costing £50 or less, can be provided tax-free under certain conditions. They must not be cash or cash vouchers and should not be performance rewards. For company directors, there's a £300 limit per tax year.

The Advantages of Offering Benefits

Business Expenses Deduction

Employers can deduct the cost of these benefits as business expenses, reducing overall tax liability. Furthermore, providing these benefits boosts employee satisfaction and retention.

Tax-Efficient Remuneration Strategy

Employers can remunerate staff without the additional burden of National Insurance and tax. Consequently, this approach is beneficial for both the employer and the employee.

Conclusion

In conclusion, tax-efficient benefit planning is a strategic way to reward employees. Whether you run a private company, charity, or social enterprise, consider incorporating benefits in kind into your remuneration strategy.

Call to Action

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Tax efficiency and tax planning is something that all businesses, whether they're private or not-for-profit organisation, should be doing. And one key area where there's a great opportunity for all businesses, whatever shape and size they are as employers, is in the context of benefit planning. And by benefit planning, it's the way to remunerate your staff,

remunerate yourselves if you happen to be a business owner in the most tax efficient way that suits both you and the employee. In this week's I Hate Numbers podcast, I'm going to cover why benefits in kind are useful why it's normally better for both the employer and employee offering some examples of tax free benefits.

I'm also going to mention something called trivial benefits. Let's crack on with the podcast

Before we dive into the meat and potatoes, the detail of this week's podcast, let me just set the scene. In the context of a business being an employer. So that could be your own private company, it could be a charity organisation, it could be a social enterprise, there are whole range of shapes and sizes crossing different sectors of entities and companies that are employers. In terms of shorthand, by the way, these ones are typically registered with HMRC for PAYE.

And this strategy that I'm going to be outlining in this week's podcast, for any detail is one that actually can be enjoyed by all businesses, irrespective of whether there's a profit motivation or not. But first of all, let's have this idea of why benefits in a framework are useful way to remunerate your staff and that staff by they could be you, if you are the owner of your own business and you will be classified as an employer as well.

Again, make sure you're registered with HMRC as an employer for all this to kick in. But leaving that aside, let's continue. Now consider this first of all as a framework. Imagine you as the individual, employee, a member of your team, wants to do something like go and participate and go to the gym on a monthly basis.

Now for them to fund that cost, they'd have to take it out of the income they receive from the company, from their employer, and that money will be received after tax and National Insurance has been levied. And also if you're the employer, then you'll also be liable to employers National Insurance on top of it. Now I don't get bogged down with lots of details and lots of numbers here. Check out the show notes by the link to the tax calculator we have which will show you the impact on some of these.

So let's take this principle. If you are a basic rate taxpayer, for you to receive 1, 000 pounds, your employer would have deducted from that, after certain allowances, 28 percent minimum for tax and National Insurance, and on top of that, there's the liability to them of paying employers National Insurance on top of that gross wage.

For you to get 1, 000 pounds, effectively, it's a few hundred quid to add on top, from the employer's point of view, they would have to have in that wage packet. If you're a higher rate taxpayer, then the numbers become more eye watering. And effectively, 1, 000 pounds crudely, if you take into account higher rate tax, then 1, 000 pounds is equivalent to earning 2, 000 pounds before National Insurance and tax is taken off, and then the employer pays 13.8

percent on top of that. So to receive a thousand net requires a much bigger figure from the employer in order for you to receive that. Now with that in mind, it's worth noting that the majority, not all, of benefits provided by an employer are valued at the cost of provision. There are a few that got some peculiar valuation rules, but we're going to deal with that in a future podcast.

Now the essence is for you to be able to enjoy that benefit, and I'll give some examples in but a few moments, then it sometimes, in fact, majority of the time is better for the employer to do that. There are some notable exceptions, but again, we'll deal with those towards the end of the podcast. In addition, by the way, the employer, certainly if they're a private company with a profit motivation there, they will be able to deduct those costs also as business expenses as well.

And that's a win-win for everybody. So if you imagine that 1, 000 pounds. Free approximation as a basic rate taxpayer, that's 1, 580 pounds to the employer plus the 13.8 percent National Insurance. And if you're a higher rate taxpayer, equivalent is 2, 188. That's a lot of money there involved. Now let's talk in terms of some what I call tax free benefits.

There are things your employer can provide you and remember if you're listening as a small business, if you're listening as somebody who runs their own company and you're thinking what does that mean? Remember you are classified as the employee director. So make sure that separation is fixed firmly in your mind. Some of the benefits that can be provided tax free, there are things such as pensions, so your company can make a pension contribution on your behalf.

It's a tax efficient way to save money for the future. And also, that presents a nice pension pot that when you get to a certain age, you'd be able to cash 25 percent of that in under current regulations, tax free, win-win. Also, you're planning for that future and the company can also deduct those contributions against its corporation tax profits.

Mobile phones, are another example. Now these aren't just your employer reimbursing of phone costs, that would not count, but your employer having the contract with a phone company providing you a phone you can use for personal calls. The company can claim the cost completely and that's a tax free benefit as well.

Computers, laptops and smartphones are also part of the deal and it's a great way for you to access those and also listen to the podcast and watch our videos on the YouTube channel, I Hate Numbers as well. That has got to be a good thing. Workplace parking is another example. Offering free parking for your employees is a tax benefit that most people will enjoy for my own team I pay their parking.

We have a city center office so that's obviously a great advantage for them a great advantage for me employee satisfaction and also a tax deductible. And it's another way of remunerating and rewarding my staff. We talked about pensions by the way. Did you know you can also get your employer to pay for pensions advice up to 500 quid?

So again, another advantage there. Let me share a couple more with you. Well, health screening and medical checkups. We always need to keep an eye on our health. So health checks paid by your employers, are tax free as well. Good for maintaining that vibe. Good for maintaining a healthy workforce, making your employees feel valued and also a deductible as well.

Now, if your employees are working from home, you can pay them a flat rate. If for any reason, by the way, folks, your employer doesn't pay that homework allowance at the magnificent sum of 6 pounds a week, you can claim it on your own personal. Now another thing I want to mention is what's called trivial benefits.

Now they're not trivial because they're insignificant, but in the context of HMRC they're considered small enough to not warrant any tax, any National Insurance. But like with all HMRC rules, there are conditions placed upon them. Understandably, obviously we don't want that system abused. Now, if it's a trivial benefit, first of all, the benefit must cost 50 or less.

It must not be cash, HMRC don't like that, or a cash voucher. It can't be a reward for work or performance. And it mustn't be in the employment contract. If you're a company director, by the way, or a member, or one of your family members, there is a 300 limit per tax year. That's still pretty generous here. So that means you can go to the theatre, for example, enjoy yourself at a spa.

You can get some small treats and small rewards without those additional tax burdens. Again, another way to take money out of your company tax free, no need to do any form filling. And again, if you're not a private company, a charity, a social enterprise, you're still a powerful employer. That's a good way to remunerate your team without having any additional National Insurance or tax burdens placed upon you.

Now there are other benefits which will attract a charge. They have their own different valuation rules here. So from cars, for example, accommodation expenses, they will all trigger a taxable benefit, but it's still worthwhile exploring. Now folks, if you've liked the sound of this and you've got some value out of this, I'd love it, obviously, if you could share that.

Give me some feedback. Give me some feedback, love, and tell me what you think. Does your company provide benefits? Do you as a business owner provide benefits in kind as a way to remunerate yourself? If you'd like to find out more, if you'd like us to assist you in that, then obviously drop us a line and we can do a little health check and diagnostic with you.

But until then, folks, also as another heads up, the Numbers Knowhow community is out there now. What is it? Well, press the link to find out here. We're doing a special offer for 24 dedicated businesses, artists, creatives, coaches to join us for the first year, free of charge to help us define, refine. We've got some wonderful resources out there already.

There's a lifetime offer and by lifetime I mean lifetime, but whatever you do folks, make sure you look at your remuneration strategy as part of the Plan it. Do it. Profit. approach. Until next week, stay sanguine. We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value.

If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.