5 Little‑Known Tax Perks for SME Directors

Introduction - Tax Perks for SME Directors

UK tax legislation is full of allowances and reliefs that, when used correctly, can significantly reduce a director’s tax burden. Unfortunately, many construction and engineering directors are unaware of these benefits or assume they’re too complex.

In this blog, we highlight five lesser‑known tax benefits, many seasonal or time‑specific, that directors of limited companies can claim. Always check with a qualified advisor for your specific circumstances, especially as tax rules change frequently.

1. Trivial Benefits – Seasonal Gifts

Trivial benefits are small gifts worth £50 or less, not cash or vouchers, and not related to work.

Directors of close companies can receive up to £300 of such benefits each tax. Examples include Christmas hampers, summer BBQ supplies or theatre tickets.

To qualify:

• The cost per gift must not exceed £50.

• It cannot be a cash bonus or a reward for work.

• You can’t include it in the director’s employment contract. Use this allowance to treat yourself and your team during seasonal events like Christmas or end‑of‑project celebrations.

2. Mobile Phone Benefit

A company can provide one mobile phone per director on a business contract, and both the line rental and calls are tax‑free. This benefit is available year‑round but is particularly useful when upgrading phones at the start of the tax year. Make sure the contract is between the company and the provider, not your personal name, to avoid tax charges.

3. Mileage Allowance and Electric Vehicles

Directors can claim 45p per mile for the first 10,000 business miles and 25p thereafter. Consider using a company‑owned electric vehicle (EV): EVs currently attract a 3% benefit‑in‑kind (BIK) rate, compared with rates up to 37% for petrol.

EVs qualify for 100% first‑year capital allowances, meaning your company can deduct the full cost of the vehicle.

BIK rates for EVs rise to only 5% by 2027/28.

Use the advisory electric rate of 7p per mile to reimburse personal.

4. Pension Contributions and Long Service Awards

Company pension contributions to registered schemes are usually tax‑free, provided they’re within the annual allowance and do not exceed 100% of the director’s. Schedule contributions at the end of the financial year to maximise relief.

Long service awards allow tax‑free gifts of up to £50 per year of service for employees with at least 20 years’ service. For long‑serving directors, this could mean a tax‑free reward of £1,000 after 20 years.

5. Health & Well‑Being Benefits

Directors can receive certain medical benefits tax‑free, including annual health screenings and medical check‑ups.

In addition, employers can pay up to £500 per year for recommended medical treatments for employees returning to work, without creating a taxable benefit.

Use this to cover physiotherapy or mental health treatment, particularly after demanding site projects.

Less Well‑Known Extras

• Workplace Parking: Providing parking near the workplace is a tax‑free benefit. If your sites change seasonally, consider paying for parking at the office or site base.

  
  

• Annual Functions: The company can spend up to £150 per head per year on events (e.g., Christmas or summer parties) without generating tax. Plan these events around seasonal milestones to keep morale high.

  
  

• CIS Compliance Checklists: Use JFA’s CIS Compliance Checklist (available on the resources page) to ensure labour payments are compliant and avoid costly penalties.

  
  

• Capital Allowance Calculator: When purchasing equipment, use JFA’s calculator to work out qualifying expenditure and avoid missing claims.

  
  

Need to Review

When planning tax‑efficient remuneration, consider:

1. Total remuneration mix: Salary, dividends, benefits and pensions should be balanced.

2. Cash‑flow: Ensure benefits don’t create cash‑flow strain; for example, plan EV purchases around profits.

3. Documentation: Keep receipts and board minutes to evidence trivial benefits and pensions.

4. Legislation changes: NIC rates and allowances change frequently, National Insurance contributions are set to increase to 15% from April 2025.

   
   

Strategy – Practical Steps

1. Plan benefits annually: Before the tax year starts, decide which benefits you’ll use, phones, EVs, trivial benefits and schedule them.

2. Use JFA’s calculators: The Break‑Even Calculator helps you plan dividends vs salary; the Capital Allowance Calculator confirms what qualifies.

3. Implement policies: Create a trivial benefits policy and ensure you track the £300 annual cap.

4. Consult professionals: Engage your fractional FD or controller to verify calculations and keep abreast of legislative changes.

5. Communicate with employees: Inform other directors and key managers about available benefits so the whole leadership team maximises opportunities.

Key Takeaways

• Trivial benefits allow directors to receive up to £300 of tax‑free seasonal gifts.

• Company‑provided mobile phones and EVs offer significant tax advantages.

• Pension contributions and long service awards are generous but often overlooked.

• Plan benefits and document them properly to stay compliant as NIC rates and tax rules evolve.

Tax rules change often, but hidden benefits can add up to substantial savings. Use JFA’s free resources, like our Capital Allowance Calculator and CIS Compliance Checklist, to maximise your benefits. For more strategies on selling your business, check out our blog on tax tips for maximising profit from selling your construction business.

Wrapping up today's insights, tomorrow we simplify another accounting challenge.