Making the most of fringe benefits
More than just a salary
With the rates of national insurance contributions (NICs) increasing by 1.25% from 6 April 2022, fringe benefits 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 at 13.25%. Certain tax-advantaged fringe benefits will also mean no, or little, NICs at 15.05% for the employer, with these types of benefit particularly suited to a salary sacrifice arrangement.
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 has fallen considerably in recent years. The company car benefit can easily be very tax inefficient, and this is borne out by HMRC figures which show that most company cars are still diesels. Cars with low emission rates are becoming more prevalent, but numbers still remain low considering the tax savings they offer over higher emission vehicles.