A guide to taxable benefits
When it comes to paying tax on earnings, most doctors are familiar with the pay as you earn (PAYE) system and how tax and national insurance is deducted on your monthly income.
But running alongside this are other components of your earnings that may suffer a tax charge. These are referred to as benefits in kind and are basically something you receive other than your salary that the taxman wants to tax you on.
The most common area that a consultant may encounter a taxable benefit is if they are provided with a car by their employer, commonly referred to as a company car.
This could be either through a salary sacrifice scheme such as the NHS Fleet scheme or perhaps through your own limited company.
Either way, the calculations of the taxable benefit is the same although the consideration of whether to have a company car through your own company is more complicated due to the cost of purchasing or leasing the car coming out of your company funds.
If you are considering this, your accountant should prepare figures to estimate the true cost of having a company car through your own limited company.
Over many years, the government has sought to reduce car emissions and therefore came up with a system whereby you pay more company car tax as emissions on the car increases as well as by reference to the value of the car that has been provided.
In many ways this was to discourage higher emission company cars and this largely worked with few people having high emission cars as part of their remuneration package.
With the raft of fully electric cars now available and more being released, having a car as part of your package has become more popular and it can also reduce superannuable earnings which for some may reduce annual allowance charges.
Reducing superannuable income through salary sacrifice may however ultimately reduce your pension on retirement and therefore you should seek advice before committing to this.