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The Chartered Instiute of TaxationSage Accountant Partner

Taxation on Employees

Tax Tips and FAQs - below you will find a list of all our Tips and FAQs - click to see the full text and/or answer. You can also select specific sections to filter the information by using the menu options.

Mileage
Company Car
Medical Insurance
Cycle to Work Scheme
Courses
Child Care
Staff entertaining
Phones
Broadband
Cheap or interest free loans
Tax Tip & FAQ Home

Mileage

 

Employees can be paid mileage if they use their own car for business. The maximum rates that can be paid tax free are:-

Approved mileage rates

 

First 10,000 business miles in the tax year

Each business mile over 10,000 in the tax year

Cars and vans
40p
25p
Motor cycles
24p
24p
Bicycles
20p
20p
 

An employer can pay an additional 5p per mile tax free if the employee takes a colleague on a business journey. If you are paid business mileage of less than the authorised rates you can write to HMRC and claim tax relief on the difference.


Company Car

 

Cars with emissions of 135gm/km are charged at 15% increased by 1% for every 5 gm/km over this limit. The maximum charge is 35%. An additional 3% supplement is charged for diesel cars. Cars with emissions of 120gm/km or less attract a charge of 10% (e.g. BMW 320d EfficientDynamics has CO2 emissions of 109 gm/km).

 

If fuel is provided along with the company car an additional tax charge arises. This is calculated by applying the percentage used to calculate the company car benefit to a set figure which is £18,000 for the 2010/11 tax year. The employer can instead pay the employee with a company car mileage for business journeys. The authorised rates from 1 December 2010 are:-

Engine size
Petrol
Diesel
LPG

1400cc or less

13p
12p
9p

1401cc to 2000cc

15p
12p
10p

Over 2000cc

21p
15p
15p

Medical Insurance

If provided to directors or employees this is a taxable benefit.  However are tax deductible for employers. 


Cycle to Work Scheme

An employer can purchase a bicycle and safety equipment on behalf of their employees, allowing a VAT, Tax and National Insurance saving for both the employer and employee. 


Courses

Courses undertaken by employees to enable them to better perform their duties are tax deductible for the employer.


Child Care

An employer can operate a salary sacrifice scheme for its employees, which allows them to pay up to £55 per week towards the cost of childcare free of tax and national insurance.


Staff entertaining

No tax benefit will arise on a Christmas or other annual function if the VAT inclusive cost of the events is less than £150 per employee per tax year.


Phones

Private home bills paid by the employer will be a taxable benefit.  There is no taxable benefit for private calls made using a company mobile phone.


Broadband

Broadband provided to an employee at home by an employer so they can use if to carry out their job will not give rise to a taxable benefit. 


Cheap or interest free loans

There is no benefit in kind on interest free or cheap loans to employees from their employer if they do not exceed £5,000 in a tax year.


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