28 Sep 9 Tax Free Benefits for Limited Company Directors
Being a director of a company means that you are also an employee. This means that the same rules apply to you as would if you were working for any other employer. It just so happens that you are, broadly speaking, the employer and the employee. There are therefore non-cash benefits that you can receive as an employee and some of these are even tax-free. Here are 9 to consider.
9 popular employee benefits that are exempt from tax
A popular tax-free benefit is to run your mobile phone through your company. The contract must be in the name of the company though, not yourself as an employee.
Reimbursing yourself for the phone expense does not qualify under the tax-free terms so be sure to get this set up correctly to avoid the tax.
Business trip mileage
If you make trips in your own car on behalf of your company, it is possible to claim back the cost of mileage. Current rates are 45 pence for the first 10,000 business miles, and 25 pence after.
It is essential that the trip is for business purposes so travelling between your home and your place of work don’t count, if you are based in one location.
Clients of AJN Accountants have the advantage of using our free software, Xero or FreeAgent, which enables mileage to be recorded easily through the month.
At the end of the month or quarter, you can simply make a transfer from your company bank account to your personal account. This way you don’t have to wait to the end of the year to get back money into your personal account.
Parking is another cost that can be paid from the company on behalf of an employee, if the parking is at the location of work, or nearby.
As parking can add up to a lot, this could be a benefit worth exploring if you take your car to work.
If you are a contractor with children, you could benefit from using childcare vouchers, which are a popular tax-free benefit for employees.
Vouchers are tax-free up to a value of £25 or £55 per week, depending on if you are a basic rate or higher rate tax payer. It also depends on when you join the scheme. It is best to clarify details with your accountant.
As an employee, the company can loan you up to £10,000 tax-free. It can be useful for cash flow, just make sure the value of loans doesn’t exceed the £10,000, else tax applies.
If you cycle to work, the company can provide you with a bike and helmet for your travels. Reasonable personal use of the bike is allowed, although the bike must be used predominantly for work.
Cost of Relocation
An employee can be rewarded by covering the costs of relocation. So if you are taking a new contract and need to move house, this added tax-free benefit could come in handy. The company can cover their moving costs, up to £8,000.
Christmas parties are allowable as a tax-free benefit for employees, including directors and their partners. The value is £150 per head as a maximum to avoid any tax implications.So, even if you are a sole director, it is possible to treat yourself and your partner to a festive dinner to celebrate your hard work through the year!
Use of home as office