As a director or for your employees, you could be putting through £000's of expenses through the company, saving Income Tax, VAT, NIC (National Insurance) and Corporation tax by taking advantage of simple tax saving opportunities!
Depending on your tax band you are in, you could be saving from 25% to 49% in tax!
This guide will cover the most common ones so you can save the most tax possible and stop paying for expenses personally that could be going through the business:
1. Mobile Phones
One mobile phone can be given to every employee in the business - including you and your family members that are employed - and there is no tax or NIC regardless of whether the phone has personal use.
It can be a great way to incentivise and retain employees within your business by offering an upgrade on the phone they currently have or if they would like a separate phone purley for business usage.
2. Keyman Insurance
This can be used to cover the lives of the most important members of your business, including yourself!
The premiums paid for by the company is an allowable business expense. This means the company will claim corporation tax relief on the premiums paid and there is no need to pay any national insurance.
If you receive any life insurance through the company, you won't typically have to pay tax. As the policy will be written in a trust, your loved ones won't have to pay any Inheritance Tax on the payout if the worst does happen.
Life insurance is a tax efficient way to protect your family and business.
3. Pension Advice
When the business pays the first £500 worth of general financial advice and tax issues relating to pensions, it can be put through the company! This basically means you are receiving £500 tax free to spend on personal pension advice
This will be in the interest to both:
Employers looking to provide tax efficient remuneration options AND
To ensure staff have access to independent pension advice.
4. Trivial Benefits
As a director, you can spend up to £300 per tax year, on pretty much anything you would like to buy through the company! This includes reclaiming VAT.
For unconnected employees, there is no limit on how many benefits you can give if the rules are met.
- The cost of each gift is £50 or less to provide
- Is not cash or a cash voucher
- Is not a reward for their work or performance
- Is not in terms of their contract
What gifts can you buy as a trivial gift?
- Bottle of champagne
- Vouchers (if you are a director you can buy 6 x £50 Amazon vouchers etc)
- Presents for events
This is a great way to extract further value through your business tax efficiently and is a deductible expense.
5. Staff Functions
Staff functions are a fantastic way to celebrate with your staff in a tax free manner.
Usually the employee can be charged for the party as a benefit in kind however if the cost of the party is less than £150 per head it will be tax free!
The £150 is a limit not an allowance so if you end up spending £151 per head, the whole amount becomes taxable... however the £150 limit can be spread across the year, so you could have 3 events at £50 per head.
The cost of the event will be tax deductible for the company as well.
Continuing your training is a way to stay ahead of the competition!
Instead of incurring any training personally, you should be putting the costs through the business to claim corporation tax relief plus there will be no benefit in kind incurred for you!
The same applies to your employees as well.
7. Employee Parking
Providing employee parking or paying for their parking on business journeys makes their life easier and you get the benefit of claiming corporation tax relief on the cost. The same applies for directors.
If you are VAT registered you can also claim back the VAT amount.
If the parking is not for business journeys then you are required to report the cost on a P11D form and pay Class 1A national insurance on the cost of providing parking.
8. Childcare Support
Childcare support can expensive so taking a look at your available options and seeing how you can do it tax efficiently can bring massive savings to you and your business!
If you are paying for childcare support personally this is something you should be looking at.
There are 3 potentials ways you can help fund childcare in a tax efficient way:
- Tax free childcare scheme
- Childcare vouchers
- Workplace Creches
Tax Free Childcare Scheme
The tax free childcare scheme is operated by Government. Contributions to an account set up by a person responsible for a child to pay for qualifying childcare are topped up by 25% of the amount of the contributions, up to a maximum of £2,000 per child per year (£4,000 if the child is disabled)
Top up payments are only made in respect of a child up to 1st September following their 11th birthday (16th birthday if the child is disabled)
Less common, however, these are now only available if you are signed up to a scheme that is still operated by the company before 4 October 2018.
The exemption of childcare vouchers is:
- Basic Rate Taxpayers - 1st £55 per week
- Higher Rate Taxpayers - 1st £28 per week
- Additional Rate Taxpayers - 1st £25 per week
The scheme is closed to new entrants however existing members will continue to receive the above benefits
One of the key benefits of a workplace creche scheme is that is saves parents money, a four-figure sum per year.
The savings are far higher than compared to the old Childcare Voucher Scheme with savings in tax and National Insurance.
9. Mileage Allowance
If you are using your personal car for business use, you should be claiming the mileage allowance for any business miles!
The company will also receive tax relief on the mileage allowance paid.
If you are looking to get a new (petrol/diesel) car, usually the most tax efficient way is to buy the car personally (unless it is electric or very low CO2) and claim the mileage allowance.
The Mileage Allowance is:
- First 10,000 miles is 45p per mile
- 25p per mile thereafter
The Mileage Allowance includes the cost of running and maintaining your vehicle so you would not be able to claim extra for those costs.
10. On Site Gym/Facilities
On site facilities provided to all your employees are a great way to reward your team in a tax efficient way.
Not as typical (normally larger companies)and can have a upfront cost to provide however it is a incentive for your employees to stay with your business.
This will be exempt from tax if:
- The facilities are available to all employees
- It is not open to members of the general public
- The facilities are used wholly or mainly by employees
If you pay for gym memberships outside your facilities it will incur benefit in kind on the amount.
11. Business Expenses Paid For Personally
If you pay for any business expenditure with your personal card you can be fully reimbursed by the company and still receive the same tax relief or you can offset the payment against your Directors Loan Account.
When reimbursing expenses, any costs incurred will be deductible against corporation tax.
12. Medical Cover
Medical cover is a way to protect yourself and your employees whilst still receiving corporation tax relief on the cost.
Many places have offers available when buying in build for mental and physical wellbeing plus some policies may allow members to reclaim dentistry and optician costs.
If you are working abroad and don’t have medical cover, the business can pay for the treatment on your behalf.
13. Lunches & Snacks
Providing lunches & snacks for your team can be a great way to increase employee morale plus there is also no benefit in kind for the employee either!
As long as the conditions are met the business will also be allowed to claim corporation tax relief and recover the VAT (where relevant) on the costs.
- Available to all employees
- Be 'reasonable' (as in cost)
- Provided at the business premises
14. Driving Charges
If you incur driving charges such as the congestion charge these costs can be tax deductible for the business.
If your staff incur fines while carrying out work duties, the company can pay for the fines on the employees behalf and receive tax relief on the amounts paid (only for employees, directors are not included)
15. Music, Audio Books & Amazon Prime Subscriptions
The cost of a spotify (business) subscription for example is allowed through the business however a music license may be required.
If you are purchasing Audio Books that are business related including Kindle subscription is allowed through the business.
Amazon Business Prime, can be claimed through the business without any tax implications
Instead of paying for such subscriptions personally you should definitely be putting these through the business and receiving tax relief on any payments!
If the accommodation is provided for:
- Qualifying business journey
- On secondment to a temporary workplace
- During the course of relocation
Then the cost of the accommodation can be put through the company. If it does not meet the criteria there will be a taxable benefit.
This is a great start to becoming tax efficient, if you want to continue ready further ways you can extract maximum value from your business - click here - to view our 32 ways to extract value from your business.
If you would like a tax diagnostic review on your business, speak to the Saint team today.
This article was written for Construction Insider and Saint Financial Group. Saint is a multidisciplinary group based in the UK that helps construction businesses develop and grow. SaintFG offers a range of quality solutions in supporting businesses.
Saint provides the luxury of free business consultancy for all of our clients, call now for your free consultation with a friendly business advisor to discuss your burning questions and put that energy back into your business!