Making the most of fringe benefits
More than just a salary
Although the main rate of employee national insurance contributions (NICs) has been reduced by 2% to 10% from 6 January 2024, fringe benefits still have a definite tax advantage when compared to conventional salary. Even if there is not much, if anything, in the way of income tax saving, directors and employees can avoid NICs. Certain tax-advantaged fringe benefits will also mean no, or little, NICs for the employer, with these types of benefit particularly suited to a salary sacrifice arrangement. There has been no corresponding reduction to the rate of employer NICs.
Private medical and dental cover is by far the most popular taxable benefit, with company cars second. However, the number of directors and employees with company cars decreased by a quarter between 2015/16 and 2022/23. Although the company car benefit can easily be very tax inefficient, HMRC figures show a distinct move towards lower emission vehicles; diesel powered company cars now only account for a third of the total.
