As a limited company Director, you’re fortunate enough to be in the unique position of being able to exercise complete control over the way in which your company pays you for your services. For most people, this means tax savings can be made by declaring a small salary and compensating themselves through issuing dividends which are taxed at a lower rate than normal salary – a normal part of the way in which HMRC tax limited companies and their directors.
However, one of the aspects many are less aware of are the many benefits which HMRC will allow your company to pay on your behalf without creating a personal tax charge. Normally when a director receives a benefit in kind from the company, such as a company car or company health insurance, this is treated as part of their overall package of remuneration and taxed under PAYE with the submission of a P11D declaration to HMRC each year, but certain expenses are exempt from this treatment.
HMRC maintain a list of Director Tax Free Benefits here:
A brief overview is worth looking at as many directors may find that it is better to have their company pay for these expenses, gaining the benefit of writing the cost off as a business expenses against Corporation Tax without the downside of paying national insurance charges that they would pay on taxable benefits like cars. While I won’t regurgitate the full list linked above here, a few that directors should bear in mind are:
- Mobile phones and Mobile phone contracts
- Pension contributions
- Pension advice
- Childcare schemes (After April 2018)
- Bikes and cycling gear under HMRC’s cycle to work scheme (see my earlier blog post on this for further details)
- Meals you consume while outside your normal place of work for business reasons
- Up to £500 of medical treatment needed to get you back to work
- Training costs to learn new skills or keep your current skills up to date.
If in doubt about whether it’s better to claim expenses through a company, feel free to ask and we can give advice on your specific situation.