22nd June 2021
What benefits can a company provide its employees? Let’s summarise the facts and cover the tax implications in a short and easy to understand guide.
What is a benefit in kind?
Simply put, if you receive any benefit from your limited company above and beyond your salary or dividends, then we are talking about benefit in kind.
Some benefits will be taxed and some not, and therefore it can be a little confusing. We recommend that you speak to your accountant before committing to anything.
Taxed or tax-free
Taxable benefits are provided for your own use and therefore not wholly, exclusively and necessarily for business use. They are taxed to prevent companies from providing them in place of regular remuneration; they are to be considered cash equivalent contributions to your income.
Examples of taxable benefits:
- Private health insurance
- Company car
- Equipment available for personal use
- A loan from your employer (Over £10,000)
- Living accommodation
There are several tax-free benefits available from your company, so be sure to discuss what is available for you with your accountant.
Examples of tax-free benefits:
- A mobile phone (company contract)
- Meals and soft drinks
- Childcare support (childcare vouchers)
- Loans up to £10,000
- Work-related training
How Benefit in Kind affects your tax bill?
After each tax year, your employer (in this case, your limited company) must report all benefits in kind to HMRC via the P11D form. HMRC then adjusts your tax code so that you pay the appropriate tax amount through your salary. At MyAccountant, preparing the form is part of our standard services.
If your salary is below the personal tax allowance, you pay the tax through your self-assessment tax return for the tax year.
In addition to the above, the company also pays National Insurance at a rate of 15.05% (2022/23 rate) of the taxable benefit in kind.
What to do next?
The benefits listed above are only a few of the many available. If you’d like to explore your options or want to know more about the benefits your company can provide, please get in touch with your accounts manager.