Your employer is required to report expenses payments to HMRC using form P11D each year. To avoid paying tax on these payments you have to claim a deduction on your Tax Return – your employer should provide you with a copy of your 2015/16 P11D no later than 6 July 2016.
This arduous process of reporting and claiming may be avoided if your employer has been granted a dispensation.
Expense payments covered by the dispensation do not have to be reported to HMRC and do not have to be included, with a counter-claim, on your own Tax Return. Payments covered by dispensations will be subject to review from time to time, including during an employer compliance visit from HMRC.
You may be able to claim tax relief for other expenses you incur in connection with your job, but the rules are fairly restrictive.
An attractive remuneration package can include any of the following:
- Salary
- Bonus schemes and performance-related pay
- Reimbursement of expenses
- Pension provision
- Life assurance and/or healthcare
- A mobile phone
- Salary sacrifice options
- Share incentive arrangements
- Choice of a company car or additional salary and reimbursement of car expenses for business travel in your own car
- Contributions to the additional costs of working at home
- Other benefits including, for example, an annual function costing not more than £150 (including VAT) per head, or long service awards.
Most benefits are fully taxable, but some attract specific tax breaks. Combining benefits with a properly arranged salary sacrifice can mean considerable savings for both employer and employee.
If you get the package right, it can be very beneficial – especially for those with income of more than £100,000 who will lose their personal allowances. If you fall into this marginal category, please talk to us to find out how we can help.