Ho Ho Ho, Modu-Claus here (get it!) with some tips for business owners to save tax this festive season!
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Decorating the Office!
If you’re going to decorate your workplace this festive season, then you’re probably a bit late! Seriously, who are you – The Grinch?! Remember though that you can claim the cost of purchasing the decorations as a business expense (and if you paid someone to do it professionally then you can claim for this as well). Remember – this has to be for the workplace, you can’t go getting an inflatable Santa for your house!
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The Company Christmas party!
If you’re planning to throw a Christmas party for your employees, you can claim the cost of this as a business expense. For this to qualify then it should be an annual event and you can spend up to £150 per person.
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Christmas gifts
You can claim the cost of Christmas gifts to employees as a business expense. Certain criteria needs to be met for employee gifts to qualify though
- Gifts must not be worth more than £50 per employee
- The gift cannot be cash or cash vouchers
- The benefit can’t be related to employee performance (this is so it can’t be used as a replacement for normal pay to avoid paying tax & NICs)
If you provide a non-cash gift to an employee (that meets the above criteria), then it is considered a ‘trivial benefit’. This means that it isn’t a benefit in kind for the employee, so they don’t pay Income Tax or National Insurance. They also don’t need to let HMRC know about it. However, if the gift costs more than £50, it will be taxable as a benefit in kind. Things like a Supermarket voucher, Online Retailer or AllForOne voucher work well here.
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Pension contributions:
This old chestnut is the grandfather of tax planning for businesses! If you’re planning to pay staff a bonus (& not just a gift as above) then paying it into their pension can give them more bang for their buck! Employees don’t have to pay National Insurance or Income Tax on the pension contribution into their pension. The cost of pension contributions for employees can be claimed as a business expense. This is the same for business owners who work in their business, if it is a limited company. If the business is a sole trader or partnership, then tax relief for pension contributions for the owner will be claimed via self-assessment.
As always the contributions must be made to a registered pension scheme, and the total amount of contributions you can claim as a business expense is limited to the annual pension allowance. For more pension tips for business owners then please see our Corporation Tax Increases Blog.
Hopefully these tips will help you plan for a very Merry Christmas by taking advantage of some tax savings!