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Tax Breaks for Directors - Part 1 Directors only - 8. Medical bills and insurance - 8.2. What’s covered?
8.2. What’s covered?Private health insurance for medical treatment in the UK is taxable, whether you pay for it and the company reimburses the cost, or the company pays for the insurance directly. However, the company may be able to negotiate a discount if it buys medical insurance for a number of its employees, directors and their families covered by one policy. Trap. Where you personally take out a medical insurance policy and the company pays the premiums, employers’ and employees’ NI is payable as...Click here -
Tax Breaks for Directors - Part 2 Director shareholders - 14. Tax-efficient salaries - 14.4. Family salaries
14.4. Family salariesAnother way to extract profit from your company and reduce its corporation tax (CT) bill is for it to pay a salary to a member of your family. Indeed, when you start as a director with just a high salary and no dividend, it might be possible to also pay a member of your family. Where, without the salary from your company they would pay no tax or pay it at a lower rate than you, this reduces the overall tax bill. It can also reduce the overall NI cost. However, the amount you pay the family...Click here -
Tax Breaks for Directors - Part 1 Directors only - 2. The higher tax rate regime - 2.2. How to maximise tax efficiency on income? - 2.2.2. Salary sacrifices (optional remuneration arrangements)
2.2.2. Salary sacrifices (optional remuneration arrangements)Salary sacrifice involves exchanging part of your salary for a benefit in kind, preferably one which is tax free (HMRC calls these optional remuneration arrangements (OpRAs)). The effect is that you can receive the same value, but with less tax and NI to pay. Since 6 April 2017 new salary sacrifice schemes are only available for a very limited range of benefits. The most of these are: pension contributionspensions advicechildcare cycle-to-work bikes...Click here -
Tax Breaks for Directors - Part 1 Directors only - 3. Your salary - 3.2. Directors’ salary and the NMW and NLW
3.2. Directors’ salary and the NMW and NLWIn principle, directors can take as much salary as they want. There’s no official cap, however there is the NMW or NLW to consider. In April 2016 the NLW replaced the NMW for employees aged 25 and over. These rules apply to directors where, for purposes of the NMW and NLW legislation, they are treated as an employed worker, but not if the only duties you perform are those of a company director or company secretary. Tax break The Department for Business, Energy...Click here -
Tax Breaks for Directors - Part 1 Directors only - 1. Compensation for being a director - 1.2. What form of compensation?
1.2. What form of compensation?While ultimately subject to veto by the shareholders, it is the board of directors that determines the amount of directors’ compensation, usually referred to as remuneration, for their duties and responsibilities. Typically, this will start with a basic salary and a right to pay linked to the company’s performance. And where you are a shareholder you can expect to receive dividends to increase your income when your company makes a profit.In addition to salary your company...Click here -
Tax Breaks for Directors - Part 1 Directors only - 4. Directors’ bonuses - 4.5. Deferring a bonus - 4.5.2. Pension contributions and benefits
4.5.2. Pension contributions and benefitsAnother way for a company to pay a bonus to selected directors efficiently for tax and NI purposes is in the form of pension scheme contributions and/or benefits in kind.Tax break An employer’s pension contribution on behalf of a director is neither taxable nor liable to NI. This means not only does the director avoid these, but the company doesn’t have to pay the employers’ NI at 13.8% of the bonus that would be due in the case of a cash payment.Tax break A bonus...Click here -
Tax Breaks for Directors - Part 1 Directors only - 6. Using company assets - 6.3. Examples of using company assets - 6.3.1. Antiques
6.3.1. AntiquesExampleIn 2018/19 Centurion Ltd made available an antique dining room table and chairs to Michael, the managing director, and a painting to Giles, the sales director. The table and chairs were worth £4,000 in 2019/20 and £5,000 when they were sold to Michael in 2021/22 for £2,000. The painting was worth £3,000 in 2019/20 and £1,200 when it was sold to Giles in 2021/22. MichaelGilesAssessable benefits££££2019/20 20% x market value8006002020/21 20% x market value8006002021/22 greater...Click here -
Tax Breaks for Directors - Part 2 Director shareholders - 13. Dividends - 13.6. Diverting dividends to save tax
13.6. Diverting dividends to save taxMost companies are formed with shares of the same class (e.g. ordinary), which means if a dividend is paid every shareholder gets a payment, not just you. By creating different classes of share you can pay each shareholder a different dividend or nothing at all. This is what’s known as a flexible dividend.If your shares are in a class of their own, e.g. ordinary “A” shares, you can pay more of the company’s profit to yourself rather than having to pay other shareholders...Click here -
Tax Breaks for Directors - Part 2 Director shareholders - 17. NI breaks - 17.3. Royalties and licence fees - 17.3.1. How do you set up this up?
17.3.1. How do you set up this up?Royalties and licence fees are similar in that they are both payments for the privilege of using some intellectual property that is protected by a patent or copyright. Setting them up, however, does have its differences.Click here -
Tax Breaks for Directors - Part 2 Director shareholders - 18. Building up a pension fund - 18.1. Introduction
18.1. IntroductionPension fund contributions enjoy tax relief at up to 45% subject to HMRC’s limits. Tax relief is given in two stages. For example, if you pay £160 into your pension plan, HMRC will add £40 and pay this direct to the pension company, so the total invested is £200. This is known as basic rate tax relief. The second stage of tax relief applies only where you’re a higher rate (40%) or additional rate (45%) taxpayer. Relief is given by reducing your income tax bill usually through self-assessment....Click here
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