Here is a reminder of small tax savings you may wish to consider over the coming year. Whilst the
individual savings may seem small, they can add up, especially if claimed every tax year and by each
director (where permissible).
Your company can spend up to £150 per head per tax year on annual events that are available to all
directors and employees. The event must be annual, for example Christmas party or summer lunch,
and the cost must not exceed £150 per attendee. You can hold several events provided each one is
an ‘annual event’ and all staff are invited. Spouses and partners can be included as attendees and
therefore you can budget for £300 per couple within the concession. You should not exceed the limit
of £150 per head otherwise the whole amount will be taxable as a benefit in kind.
A close company can pay trivial benefits to a director or employee, or a member of their family, up
to a maximum of £300 per tax year per director/employee. Each benefit must cost no more than
£50, must not be cash or exchangeable for cash, and must not be a reward for services or in any way
obligatory. Note that if the benefit exceeds £50, the full amount is taxable, not just the excess over
£50. This may not seem worth the effort but could save tax and NI of £167 pa for each director who
is a higher rate taxpayer (assumes 6 benefits of £50 each paid).
If you arrange for your phone contract to be in the company name, rather than your personal
name, then the company can pay for the full ongoing costs. No deduction required for personal use.
If you regularly use a computer for business the company can pay for the cost of an annual eye test.
Glasses that are prescribed specifically for VDU use, and which are not used for any other purpose,
may also be claimed or paid for by the company.
Annual medical check-up
The company can pay for the cost of one annual health check or screening for a director or
employee per tax year.
The first £500 of the cost of seeking pension advice may be paid by or claimed from the company.
If you are married or in a civil partnership and your income falls within the basic rate band of
£12,570 and £50,270, and your partners income is less than £12,570, then your partner may transfer
up to £1,260 of their personal allowance to you. The person with the lowest income should make
the claim online. You can backdate a claim up to 4 years. Once a claim has been made it will
automatically renew each tax year until either you cancel it, or the marriage ends. Those earning
above £11,310 but below £12,570 can still transfer £1,260 of allowance but will themselves become
liable to pay tax on any income in excess of £11,310. The partner still makes a tax saving of £252, but
any extra tax paid by them would reduce the overall savings made. https://www.gov.uk/marriageallowance and https://www.gov.uk/apply-marriage-allowance
If the majority of your work is not for Public Sector clients and you have two directors or employees
each earning a salary of least £8,840, or an employee who earns at least £8,840, then you may be
entitled to claim the Employment Allowance. If your only income during the year is under IR35 you
may not claim. This allowance gives relief for up to £4,000 of Employers NI due by the company.
Blackman Terry can arrange to recover this for you. If you think you may be eligible and have not yet
made a claim, please let us know. Note that you can make a claim for prior years in which you think
you were eligible (up to 4 years after the end of the tax year in which the allowance applies).
If you or your partner are in receipt of child benefit it could be in your interest to restrict your
taxable income to below £50,000 if possible. This would avoid the child benefit tax charge which
arises when one of you earns more than £50,000 (child benefit is completely withdrawn if either of
you earn £60,000 or more). Taxable income is all salary, interest and dividends that are taxable less
relevant deductions such as personal pension contributions and GiftAid. https://www.gov.uk/childbenefit-tax-charge
An individual may receive dividend income of up to £2,000 tax free in 2021/22.
You can make contributions directly from the company into a personal pension plan without any
restriction to the amount of salary you have paid yourself, provided you have sufficient pension
allowance available (you should check this with your financial advisor before making any payment).
These contributions are fully deductible against company income, which can make them a very tax
efficient method of extracting funds from the company.
Small trading receipts
In 2017/18 a new £1,000 allowance for small trading receipts and property income was introduced.
The £1,000 applies to each type of income so you can potentially be exempt from paying tax on the
first £2,000 of such income. Restrictions apply so please consult with your personal tax advisor or
refer to the following for more information. https://www.gov.uk/government/publications/incometax-new-tax-allowance-for-property-and-trading-income/income-tax-new-tax-allowance-forproperty-and-trading-income