Tax on Flexible Benefits?

Question

I get optional benefits with my new work BUT some are taxable - Dental, Rivate health etc.

How can I work out hgow much these will cost me in tax before I opt in - otherwise I am locked in for 12 months !!

thanks

Answer 1

I've answered this assuming you're a UK taxpayer.

The basic rule is that a benefit will be taxable based on the 'cost to employer' principle.

If the medical health cover would cost you £250 per annum to buy privately but your employer can buy for £200 due to bulk discount, you'll be taxed on £200. If you are a basic rate taxpayer this costs you 22%, ie £44. If you are a higher rate taxpayer, this costs you 40%, ie £80 - both considerably cheaper than buying the cover yourself.

The tax will be collected via your payslip each week or month, assuming your employer correctly notified HMRC of the benefit and your tax code is changed.

Benefits like co cars, fuel, accommodation and loans have specific rule but anything else follows this general rule.

As part of the flexben scheme your employer should be providing you with information on the 'cash equivalent' of the benefit to allow you to work out the tax.

Hope this helps

Answer 2

What country do you live in?! If, as I suspect, the USA I would not attempt to answer - consult a professional eg accountant.