If you’re an employee, who has taken advantage of any taxable benefits on offer from your employer during the last tax year, then 6th July is just around the corner. Why should you be interested? Because if you want to reduce the amount of tax you pay on your taxable benefits, then you only have a short time in which to ‘make good’.
Confused? Don’t worry! We will take a look at what ‘making good’ actually means and why you should take action. But first…
What is a taxable benefit?
Taxable benefits, benefits in kind, non-cash benefits – it doesn’t matter what you call them, they all refer to something your employer gives you in addition to your salary.
There are lots of different employee benefits and on some of them, such as free or subsidised meals at your work place, you won’t need to pay tax. However, there are a lot of others where you will. Some of the most common taxable benefits you’ll come across are:
- Private health insurance: you will need to pay tax on the cost of insurance premiums if they are paid by your employer. Don’t forget some medical benefits are free, such as eye tests if you use a computer at work.
- Company Car: if you use a company care privately, then you will have to pay tax, based on the value of the car and the type of fuel it uses.
- Car fuel: if you have a company car and also receive free fuel from your employer, you will be taxed on the cash equivalent of the benefit each year.
- Interest-free loan: if your loan is less than £10,000 during the tax year, then you won’t have to pay tax. If it’s over £10,000 you pay tax on the difference between the interest rate you pay to your employer and the official rate set by the Bank of England. Season tickets for travel have the same rules as interest-free loans.
So, what is ‘making good’?
Making good basically allows you to make a payment to your employer, normally in cash, for any taxable benefit you receive. This helps reduce the taxable value of the benefit, so you pay less tax, or in many cases nothing at all i.e. ‘making good’.
The deadline for making a payment is 6 July. You can still make payments after the deadline, but it won’t reduce the taxable value of the benefit in kind. This means it will still be taxable and liable for National Insurance contributions.
How do you go about ‘making good’?
If you’re interested in ‘making good’ any of your benefits in kind, then you need to act fast!
Your employer will be able to tell you the cost of providing a particular benefit. Then, it’s just a case of you making a contribution, that they deduct from the figures they report to HMRC. It’s as simple as that, and given it could see you saving a packet in tax, something well worth doing.
Interested in how taxable benefits affect the tax your pay? Then take a look at this useful benefits in kind calculator.
If you’re still unsure about ‘making good’ or are an employer interested in getting to grips with employee benefits, why not get in touch for some friendly advice.