Company flexible benefits scheme - cutting tax?

golly99

Hi

Recently joined a company with flexible benefits, e.g. you can add/reduce holidays, private medical cover, etc. There's loads of options on what you can select, what I wanted to know is would I be better selecting a load of options to get my monthly figure below the higher tax band (is this £33k ish for the year?) so I don't pay as much tax and get more benefits or would there not be much difference?

Hope I've made sense!

Thanks

barvid

Don't forget that some benefits will be taxed as benefits in kind (e.g. medical insurance) so reducing your income tax may not be the whole picture. There are only a few benefits that aren't taxable and NICable. Life assurance is one, I think.

The only real way to significantly reduce your tax and NI bill through a flex scheme is if it's set up via a salary sacrifice arrangement. Unless you're talking about very expensive benefits where there are clear tax breaks (e.g. childcare vouchers through salary sacrifice, or large pension contributions) then you're probably not going to make much of a difference to yourself.

Make sure you go for the salary and benefits package that suits you and don't worry too much about the tax and NI.

Oh, and the higher rate tax band for 2007/08 is earnings above £34,600. Don't forget, though, that this is after your personal allowance - if you have the standard allowance of £5,225 then you'd start paying 40% tax once your salary hits £39,825.