Work expenses

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Dh has just been offered a job.

A.good Base but it is slightly lower than he had wanted. The company have however offered him £25600 a year of personal expenses in addition.

We are waiting for confirmation of the tax position from the accountant but from what I've looked at it would seem as though we need to pay tax on the cost of the expense. Is this right?

Eg train fair is £300 a month
If company reimburse this we pay tax of 40% so £120 meaning we save £180.

Can anyone say if this is allowed? It seems very confusing.

If they add it to his salary, then it would become his gross income. However, they will probably just give him a company credit card? Then he'd just spend money on it and the employer would sort it out.

I think expenses are allowed, providing he pays tax on them as effectively it's just extra salary that has to be spent on a particular item. He might save National Insurance costs and the employer probably will save employer's NI costs, which is probably why they are doing it.

Are there any limits on what sort of personal expenses he could claim? £25600 a year is over £2000 a month, which is quite a lot - would he spend that much? Would the expenses be just for him, or his family as well - could he pay for a mobile phone for you for example?

Would he need to travel in the new job? If so, any food, hotels, travel/cars/fuel etc that is solely for travelling away from his main place of work is allowed and not taxable - would that come out of the allowance or be separate?

It sounds like it could be an adminstrative hassle, but I suppose he should try to work out the value of the expenses and also the overall package when deciding whether taking the job.

It will depend on what the expenses are and how they are paid.

Travel to and from your usual place of work is taxable if your employer pays it so yes, you will pay tax on the £300.

Travel to other locations for business wluld not be taxable.

Entertaining clients is taxable.

It's quite a complex area and you are wise to see guidance from an accountant.

Thank you everyone who has replied.

Yes it just over 2k a month to spend how he likes apparently so yes could.pay for my phone etc.

Work incurred expenses for work travel are paid in addition.

We're happy to pay the tax but just want to know exactly what is what so we can evaluate the package properly.

It's seems like.its a good deal. To use the example above the train will cost £120 a month instead of £300 what's not to like......

If it's just an extra £2k a month for whatever he liked the easiest thing would be to add it to salary as a 'ex-gratia' payment as tax is dealt with etc. I assume they do this expense account thing rather than add to salary so they don't have to pay pension etc.

If he can truly spend it as he likes HMRC would certainly class this as earnings and expect it to be subject to Employers' NI as well as tax.

Sounds dodgy to be honest. If it was that easy, everyone would be doing it.

I have to sign a HMRC document every year where I confirm that all my expenses, everything I spent on my company credit card, are work related.

You'd have to pay tax on anything personal.

It's not dodgy. If you pay the tax on the personal expenses, it's all above board.

They are doing this to avoid having to pay so much into a pension, or something else based on % of salary such as bonuses. Lower the salary, lower the pension payments.

Is it a good deal? Potentially: it depends what your DH would have expected in salary otherwise. If you're net getting out of it what you wanted, then it's just a way for the employer to structure it so it costs them less. But do work out what it's worth to you all things considered. Would you need to put extra into a pension to make up for it? Will you always spend that much every month? You can't choose to save it as cash instead, for example. Is putting in the expenses onerous? Is there a delay to reimbursement?

Other things to consider: will you be getting a mortgage any time soon where the bigger salary number would be more useful?

It'll be taxed and NI'd, but as it's not part of his actual salary the company won't pay his pension contributions on it, won't be part of sick pay if he's off long term, probably not used in statutory redundancy calculations. Be careful...

OK so.dh has to.self assess anyway as he loses his personal allowance so can he just declare the expenses on his tax return and pay the bill at the end or does the employer need to make the deductions at.source.

Dh wanted.an extra £8k on his salary so we are quids in if this all works out.

Mortgage wise we should be fine thank goodness