Making the most of fringe benefits
Why should you consider fringe benefits?
Whilst pay rises are normally popular, they aren’t the only way to reward employees and directors. A fringe benefit is essentially any type of non-monetary compensation, and can be anything from pension provision to medical cover, a company car or the use of a company yacht. The tax rules for fringe benefits change frequently, so it is important to use up-to-date information and plan ahead. Just because a benefit is, or is not, tax efficient this tax year, the situation may change in the future. For example, recent changes include an increase to the percentage surcharge applied to diesel company cars and the introduction of an exemption for employer-provided pension advice.
As a director, there might be a tax advantage to taking a benefit rather than the additional income needed to purchase the benefit yourself. As an employer, you will be looking to use fringe benefits to attract, reward and retain employees. Benefits can be provided on top of normal salaries, or they may be provided as part of a salary sacrifice arrangement.
Some fringe benefits are completely free of tax, whilst some benefits are free of national insurance contributions (NICs) as far as employees are concerned. As an employer, you may well be able to acquire some benefits, such as medical cover, at a discount on what an employee would have to pay for the benefit personally.