PAYROLLING BENEFITS IN KIND

Gerry MacCrossan

PAYROLLING BENEFITS IN KIND


HMRC are encouraging more employers to payroll employee benefits in kind rather than declaring benefits on the end of year P11d forms.

If employers haven’t already done so they should register online with HMRC on or before 5 April 2022 to payroll employee benefits for the upcoming 2022/23 tax year.

The advantages of payrolling benefits in kind are:

  • employers no longer need to submit P11D and P46(Car) forms to HMRC
  • simpler PAYE codes mean HR teams receive fewer queries from employees regarding tax
  • tax deductions in monthly payroll will be more accurate
  • tax codes for individuals should change less frequently
  • fewer forms for employers to complete at year-end

DON’T LOSE YOUR 2021/22 PERSONAL ALLOWANCE

For every £2 that your adjusted net income exceeds £100,000 the £12,570 personal allowance is reduced by £1. Pension contributions and Gift Aid can help to reduce adjusted net income and save tax at an effective rate of 60%. The restriction applies between £100,000 and £125,140 adjusted net income.

CONSIDER A SALARY SACRIFICE SCHEME

Another way that you could avoid the personal allowance trap and reduce income tax and national insurance would be to agree with your employer to sacrifice some of your salary in exchange for a tax-free, or low tax benefits in kind. Common examples would be additional pension contributions or providing an electric company car in exchange for a lower salary.

We can assist you in setting up a salary sacrifice arrangement correctly as it will involve amending the contract of employment. You may be doing this anyway as many employers are moving to “hybrid” working and changing the days that staff are required to work in the office.