Do you work with a financial advisor or planner to support you with your long term financial plans, both for your personal and business finances? It’s the best way to make the most out of your allowable benefits, as you may not realise what they all are.
However, this blog will talk you through some ways of maximising your allowable expenses.
Pensions
Making employer pension contributions through your limited company if you’re a director, is a tax efficient way of saving into your pension for retirement. Remember these contributions are typically considered a deductible business expense, so they reduce your company’s taxable profits and ultimately lower your corporation tax liability. You may also get the tax relief on the contributions in your pension pot too.
Executive Income protection (EIP)
Executive income protection, also known as executive income replacement or executive income insurance, is a type of insurance policy designed to protect the income of high-earning individuals, such as company directors or executives, in the event they are unable to work due to illness or injury.
EIP provides a portion of your income if you become unable to work due to a covered illness or injury. This can help you maintain your lifestyle and meet financial obligations while you recover. These policies are typically tailored to your specific income level and financial situation, ensuring that the coverage amount adequately replaces your lost earnings.
As a director your role within your company is crucial to its operations and success. If you’re unable to work due to a long-term illness or injury, it can have a significant impact on the company’s performance. Executive income protection can provide financial stability to the business by allowing you to continue paying your share of business expenses or hiring temporary replacements.
EIP premiums are also tax-deductible as a business expense!
Private Medical Insurance
Private Medical Insurance can be provided to directors and staff. Often you, the business owner, are the key person for whom the business relies on for success. With NHS waiting times being what they are, getting any issues dealt with quickly and getting you and your employees back to work has to be a priority. Private Medical Insurance premiums can be paid via the business and are allowable expenses for corporation tax purposes, but they often qualify as a P11D benefit so this needs to be considered.
Shareholder Protection Insurance
Shareholder protection insurance, also known as shareholder or partnership insurance, is a type of business insurance that provides financial protection for the shareholders or partners of a company if one of them passes away or becomes critically ill. This insurance is designed to address the potential financial and operational challenges that can arise when a shareholder or partner dies or is unable to continue working due to a severe illness or disability. This is another expense which is allowable for corporation tax purposes.
Trivial Benefits
Have you come across trivial benefits before? Did you know that you can provide a benefit to your employees without incurring any tax?
You don’t have to pay tax on a benefit for your employee if all of the following apply:
- it cost you £50 or less to provide
- it isn’t cash or a cash voucher
- it isn’t a reward for their work or performance
- it isn’t in the terms of their contract
This is known as a ‘trivial benefit’. The best example of this would be a shop voucher for somewhere like Amazon, John Lewis, Marks and Spencer etc. If you are a director you can also take advantage of this benefit, however, you can’t receive trivial benefits worth more than £300 in a tax year if you’re the director of a ‘close’ company (a close company is a limited company that’s run by 5 or fewer shareholders).
You don’t need to pay tax or National Insurance or let HMRC know. You do have to pay tax on any benefits that don’t meet all the above criteria.
I hope this blog gives you an idea of how you can maximise your expenses before year end. I recently worked with an advisor to deliver a joint presentation about tax planning. He had some useful tips on how to make the most of your pension, along with recommendations of certain products which are allowable business expenses and can therefore help reduce your corporation tax. We’ve touched upon this information but if you’d still like further information we can connect you with one of our recommended advisors.. Please just send me an email support@numberworkservices.co.uk and use the subject ‘Maximise Expenses’.
If you need a bookkeeper who will accurately record your data, produce insightful reports to help you grow your business and will help you to save as much money as possible off your tax bill then book a call today.