Tax Tip for Directors to Extract £300 Per Year From Their Business

To extract £300 from your business tax efficiently, per director, per year, you can follow the tax on trivial benefits rules HMRC currently have in place.

The same rules apply for employees and are limited to £50 per transaction, else the benefit needs to be declared.

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

A cash voucher is a voucher that is exchangeable for cash. Conventional retail vouchers are deemed non-cash vouchers as they are only exchangeable for the goods and services of that store, and cannot be converted to cash. Therefore a £50 voucher for a high street store or supermarket is the best route to take.

This is known as a ‘trivial benefit’. You don’t need to pay tax, National Insurance or let HMRC know.

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. Therefore, the limit for directors is 6 x £50 per year.

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